ACC 151 Lecture 22: Statement of Cash Flow

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cerisegiraffe538

8 Dec 2015

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Acc 151 lecture 22 statement of cash flow. A span of time (month, quarter, year) Determines ability to pay dividends and interest. Shows relationship of net income and cash flows. Create revenue, expenses, gains and losses net income. Cash flows related to long-term liabilities and owners" equity. Issuance of stock--financing: borrowing long-term assets financing, sales revenue--investing, payment of dividends--financing, payment of land within cash--investing, payment of treasury stock--financing, paying bonds payable--financing. Interest expense--operating: sale of equipment--investing, gogs--operating, purchase of another company within cash--investing, marketing a loan investing. Indirect reconciles rom net income to net cash provided by operating activities. Direct reports all cash receipts and cash payments from operating activities. Decreases in current assets other than cash. Increases in current assets oher than cash. Sale of investment that are not cash equivalents. Purchase of investments that are not cash equivalents.

Related Questions

Which of the following characteristics may result in theclassification of a liability being changed from current tononcurrent:

a) violation of a subjective acceleration clause

b) violation of a objective acceleration clause

c) a demand provision for payment

d) refiancing after the balance sheet date

Pending litigation would generally be considered:

a) nonmonetary liabilty

b) contingent liability

c) estimated liability

d) current liability

Barrons Co. current ratio is 2:1. Which of the followingtransactions would normally increase Barney's current ratio?

a) purchasing inventory on account

b) borring money by signing a long-term note

c) collecting an account receivable

d) purchasing land for cash

On multiple step income statement, gains or losses on sale ofequipment would be shown

a) before gross profit on sales

b) after gross profit on sales but before income from conitnuingoperations

c) after income from continuing operations but before incomefrom extraordinary items

d) after income before extraordinary items but before netincome

A single step income statement is a format that

a) compares the current years income with last year's income

b) recongnizes subtotals at intermediate stages such as grossmargin

c) combines revenues and gains and subtracts from them expensesand losses, resulting in income from operations

d) reports sales revenue, cost of goods sold, gross margin, andall other expenses

In contrast with a multiple-step income statement, a single stepincome statement does NOT show the amount of

a) income taxes on continuing operations

b) cost of goods sold

c) gross profit

d) earnings per share

The amount of income reported for tax purposes

a) is nomally greater than the net income reported tostockholders

b) must be computed according to GAAP

c) is used to compute earnings per share

d) may differ from the amount of income detemined for financialreporting purposes

Under the general rule of revenue recognition, revenue isrecognized when

a) marketability and market price are assured

b) a contractual agreement exists, and cash collection isassured

c) the earnings process is complete, and a valid promise ofpayment has been received

d) all related expenses have been incurred

Seaworth Company's gross sales in 2014 were 3930000. Assumingsales returns and allowances were 74000 sales discounts were 35000and freight-out was 28000 what were Seaworthy's net sales in2014?

a) 3792000

b) 3821000

c)3856000

d) 3930000

On June 30, 2014 Sonata COmpanys operating facilities inNebraska were detroyed by a flood. The loss of $700000 was notcovered by insurance. Sonata's tax rate for 2014 is 40 percent. InSonatas income statement for the year ended sept 30 2014 this eventshould be reported as an extraordinary loss of

a) 0

b) 280000

c) 420000

d) 700000

In a statement of cash flows, payments to acquire debtinstruments of other entities would typically be classified as cashoutflows for

a) financing activities

b) equity activities

c) operating activities

d) investing activities

A gain on the sale of a plan asset in the ordinary course ofbusiness should be presented in a staement of cash flows preparedusing the indirect method as

a) a cash inflow from investing activities

b) a cash inflow from financing activities

c) a deduction from net income

d) a addition to net income

In a statement of cash flows, proceeds from issuing equityinstruments should be classified as cash inflows from

a) brokerage activities

b) financing activities

c) investing activites

d) operating activities

When preparing a statement of cash flows using the indirectmethod, the amortization of trademarks should be reported as a

a) increase in cash flows from investing activities

b) reduction in cash flows from investing activities

c) increase in cash flows from operating activities

d) reduction in cash flows from operating activites

A loss in the sale of machinery in the ordinary course ofbusiness should be presented in a statement of cash flows( indirectmethod) as

a) an addition to net income

b) a deduction from net income

c) an inflow and outflow of cash

d) an outflow of cash

In preparing a statement of cash flows, which of the followingtransactions would be considered an investing activity?

a) sale of a business segment

b) Issuance of bonds payable at a discount

c) purchase of treasury stock

d) sale of capital stock

In a statement of cash flows (indirect method), depreciation istreated as an adjustment to reported net income becausedepreciation

a) is an inflow of cash to reserve account for assetreplacement

b) reduces the reported net income and involves an inflow ofcash

c) reduces the reported net inome but does not involve anoutflow of cash

d) usually represents a significant portion of operatingexpense

orchidfrog938

EXHIBIT 5

AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Year Ended December 31,
	2014			2013			2012
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	8,658		$	8,084		$	5,269
OPERATING ACTIVITIES:
Net income (loss)	(241		)	274			(39		)
Adjustments to reconcile net income (loss) to net cash fromoperating activities:
Depreciation of property and equipment, including internal-usesoftware and website development, and other amortization	4,746			3,253			2,159
Stock-based compensation	1,497			1,134			833
Other operating expense (income), net	129			114			154
Losses (gains) on sales of marketable securities, net	(3		)	1			(9		)
Other expense (income), net	62			166			253
Deferred income taxes	(316		)	(156		)	(265		)
Excess tax benefits from stock-based compensation	(6		)	(78		)	(429		)
Changes in operating assets and liabilities:
Inventories	(1,193		)	(1,410		)	(999		)
Accounts receivable, net and other	(1,039		)	(846		)	(861		)
Accounts payable	1,759			1,888			2,070
Accrued expenses and other	706			736			1,038
Additions to unearned revenue	4,433			2,691			1,796
Amortization of previously unearned revenue	(3,692		)	(2,292		)	(1,521		)
Net cash provided by (used in) operating activities	6,842			5,475			4,180
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-usesoftware and website development	(4,893		)	(3,444		)	(3,785		)
Acquisitions, net of cash acquired, and other	(979		)	(312		)	(745		)
Sales and maturities of marketable securities and otherinvestments	3,349			2,306			4,237
Purchases of marketable securities and other investments	(2,542		)	(2,826		)	(3,302		)
Net cash provided by (used in) investing activities	(5,065		)	(4,276		)	(3,595		)
FINANCING ACTIVITIES:
Excess tax benefits from stock-based compensation	6			78			429
Common stock repurchased	â			â			(960		)
Proceeds from long-term debt and other	6,359			394			3,378
Repayments of long-term debt	(513		)	(231		)	(82		)
Principal repayments of capital lease obligations	(1,285		)	(775		)	(486		)
Principal repayments of finance lease obligations	(135		)	(5		)	(20		)
Net cash provided by (used in) financing activities	4,432			(539		)	2,259
Foreign-currency effect on cash and cash equivalents	(310		)	(86		)	(29		)
Net increase (decrease) in cash and cash equivalents	5,899			574			2,815
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	14,557		$	8,658		$	8,084

EXHIBIT 6

AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Year Ended December 31,
	2014			2013			2012
Net product sales	$	70,080		$	60,903		$	51,733
Net service sales	18,908			13,549			9,360
Total net sales	88,988			74,452			61,093
Operating expenses:
Cost of sales	62,752			54,181			45,971
Fulfillment	10,766			8,585			6,419
Marketing	4,332			3,133			2,408
Technology and content	9,275			6,565			4,564
General and administrative	1,552			1,129			896
Other operating expense (income), net	133			114			159
Total operating expenses	88,810			73,707			60,417
Income from operations	178			745			676
Interest income	39			38			40
Interest expense	(210		)	(141		)	(92		)
Other income (expense), net	(118		)	(136		)	(80		)
Total non-operating income (expense)	(289		)	(239		)	(132		)
Income (loss) before income taxes	(111		)	506			544
Provision for income taxes	(167		)	(161		)	(428		)
Equity-method investment activity, net of tax	37			(71		)	(155		)
Net income (loss)	$	(241	)	$	274		$	(39	)
Basic earnings per share	$	(0.52	)	$	0.60		$	(0.09	)
Diluted earnings per share	$	(0.52	)	$	0.59		$	(0.09	)
Weighted average shares used in computation of earnings pershare:
Basic	462			457			453
Diluted	462			465			453

Cash Flows at Amazon.com

Case Questions:

Graph the financial statement items in Exhibit 1. Graph revenueand COGS separate from the other items in Exhibit 1 because oftheir magnitude (i.e., make two graphs).

Using the graphs above, identify time periods of similarcharacteristics and classify them using the following life cycleterms: introduction, growth, maturity, or decline (see Exhibit 4for definitions). For each period labeled, provide support for yourclassification. Specifically, briefly discuss the patterns observed(e.g., in revenue, income, operating cash flow, investing cashflow, and financing cash flow) and how they indicate whereAmazon.com is in the life cycle.

What is the general trend in cash flows from investingactivities in Exhibit 3 from 1995 to 2010? Discuss both the netcash flows from investing activities (CFI) and the components ofCFI.

Why did Amazon.com invest in marketable securities (Exhibit 3,net change in securities)?

Analyze Amazon.comâs performance for fiscal year ended December31, 2014 using its Consolidated Statements of Cash Flows (Exhibit5) and Consolidated Statement of Operations (Exhibit 6).Specifically, answer the following questions:

(a) What are Amazon.comâs net incomeor loss over the three years? Comment on the companyâsprofitability.

(b) Comment on Amazon.comâsperformance using cash flows from operating, investing andfinancing activities over the three-year period.

(c) How do you reconcile the largediscrepancy between a net loss of $241 million and net cash fromoperating activities of $6,842 million for fiscal year endedDecember 31, 2014?

I need all of these answeredthouroughly!!! Like as best as possible with as much explanation! Icould not fit intoi one post so the others 2 post before this arerelated!!! Thank you!

magentalouse253

Comparative financial statement data for Carmono Company follow:

	This Year		Last Year
Assets
Cash	$	7.50	$	14.00
Accounts receivable		50.00		43.00
Inventory		92.50		79.20

Total current assets		150.00		136.20

Property, plant, and equipment		231.00		194.00
Less accumulated depreciation		45.60		34.20

Net property, plant, and equipment		185.40		159.80

Total assets	$	335.40	$	296.00

Liabilities and Stockholdersâ Equity
Accounts payable	$	55.50	$	46.00
Common stock		118.00		91.00
Retained earnings		161.90		159.00

Total liabilities and stockholdersâ equity	$	335.40	$	296.00

For this year, the company reported net income as follows:


Sales	$	850.00
Cost of goods sold		510.00

Gross margin		340.00
Selling and administrative expenses		320.00

Net income	$	20.00

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Carmono CompanyStatement of Cash Flows - Indirect MethodFor This Year Ended December 31Operating activities:Net income$20.00Adjustments to convert net income to a cash basis:Depreciation$11.40Increase in accounts receivable(7.00)Increase in inventory(13.30)Increase in accounts payable9.500.60Net cash provided by operating activities20.60Investing activities:Increase in plant and equipment(37.00)Net cash used in investing activities(37.00)Financing activities:Increase in common stock27.00Cash dividends(17.10)Net cash provided by financing activities9.90Net decrease in cash(6.50)Beginning cash and cash equivalents14.00Ending cash and cash equivalents$7.50

2.	Compute Carmonoâs free cash flow for this year. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.)

Free cash flow$

Changes in various accounts and gains and losses on the sale of assets during the year for Argon Company are given below:

Item		Amount
Accounts receivable	$	79,000	decrease
Inventory	$	120,000	increase
Prepaid expenses	$	3,500	decrease
Accounts payable	$	41,000	decrease
Accrued liabilities	$	9,600	increase
Income taxes payable	$	15,700	increase
Sale of equipment	$	8,100	gain
Sale of long-term investments	$	12,200	loss

Required:

For each item, indicate whether the dollar amount should be added to or deducted from net income under the indirect method when computing the net cash provided by operating activities for the year.

Item	Amount	Effect
Accounts receivable
Inventory
Prepaid expenses
Accounts payable
Accrued liabilities
Income taxes payable
Sale of equipment
Sale of long-term investments

Apex Company prepared the statement of cash flows for the current year that is shown below:

Apex Company Statement of Cash FlowsâIndirect Method
Operating activities:
Net income			$	41,500
Adjustments to convert net income to cash basis:
Depreciation	$	20,100
Increase in accounts receivable		(61,500)
Increase in inventory		(25,100)
Decrease in prepaid expenses		9,400
Increase in accounts payable		54,300
Decrease in accrued liabilities		(10,100)
Increase in income taxes payable		3,300		(9,600)

Net cash provided by operating activities				31,900
Investing activities:
Proceeds from the sale of equipment		15,200
Loan to Thomas Company		(41,900)
Additions to plant and equipment		(121,800)

Net cash used for investing activities				(148,500)
Financing activities:
Increase in bonds payable		88,800
Increase in common stock		38,700
Cash dividends		(28,400)

Net cash provided by financing activities				99,100

Net decrease in cash				(17,500)
Beginning cash balance				27,200

Ending cash balance			$	9,700

Required:

Compute Apex Companyâs free cash flow for the current year. (Negative amount should be indicated by a minus sign.)

Free Cash Flow

For the just completed year, Hanna Company had net income of $95,000. Balances in the companyâs current asset and current liability accounts at the beginning and end of the year were as follows:

	December 31
	End of Year		Beginning of Year
Current assets:
Cash	$	59,000	$	80,000
Accounts receivable	$	164,000	$	184,000
Inventory	$	448,000	$	346,000
Prepaid expenses	$	11,500	$	15,000
Current liabilities:
Accounts payable	$	366,000	$	392,000
Accrued liabilities	$	8,000	$	13,000
Income taxes payable	$	32,000	$	25,000

The Accumulated Depreciation account had total credits of $42,000 during the year. Hanna Company did not record any gains or losses during the year.

Required:

Use the indirect method to determine the net cash provided by (or used in) operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

redgrasshopper904

ACC 151 Lecture 22: Statement of Cash Flow

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