AGED 260 Lecture Notes - Lecture 7: Cash Flow, Net Income, Financial Statement

54 views2 pages

coralgoose264

15 Dec 2017

School

University of Illinois

Department

Agricultural Education

Course

AGED 260

Professor

L Burgoon

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

What are three sections of the statement t of cash flows: operating, investing, financial. Classify the following items: interest paid, interest received, dividend paid, dividend received. Direct method- cash effect of each operating activity is reported directly in the statement. Indirect method- net cash flow is derived indirectly by starting with reported net income and adding or subtracting items to convert that amount to a cash basis. Items that affected ni but have no cash effect: depreciation, amortization. Items that affected ni and cash but not from an operating activity: gains and loss in sale of property and equipment, operating items for which the income effect differs from the cash flow effect (current assets/ liabilities) Increases n current assets- negative adjustment to ni. Decreases in current assets-positive adjustment to ni. Decreases in current liabilities-negative adjustment to ni. Ni to cfo: decreases in current liabilities: debit interest expense.

Related Questions

Cash flows from Operating Activities

Income Statement Indirect Method Direct Method

Net income

Adjustments:

Sales $311 Decrease in accounts receivable 7 Cash receivedfrom customers

Gain on sale of equipment 25 Gain on sale of equipment (25)(Not reportedâno cash effect)

Cost of goods sold Increase in inventory (13)

Increase in accounts payable 19 Cash paid to suppliers(175)

Salaries expense (44)

7 Cash paid to employees (37)

Depreciation expense (10) Depreciation expense 10 Cash paidfor depreciation

Interest expense Decrease in bond discount 4 Cash paid forinterest (10)

Insurance expense (23) Decrease in prepaid insurance 10 Cashpaid for insurance

Loss on sale of land (7) Loss on sale of land 7 (Notreportedâno cash effect)

Income tax expense (29) Increase in income tax payable Cashpaid for income taxes (22)

Net Income $223 Net cash flows from operating activities $26Net cash flows from operating activities $-244

goldtrout992

PROBLEM 14-9 Understanding a Statement of Cash Flows (L014-1, L014-2] Brock Company is a merchandiser that prepared the statement of cash flows and income statement provided below: Brock Company Statement of Cash Flows-Indirect Method $ 275 Operating Activities Net income ... Adjustments to convert net income to a cash basis: Depreciation ........ Increase in accounts receivable.... Decrease in inventory ........ Decrease in accounts payable .......... Decrease in accrued liabilities ........ Increase in income taxes payable ................ Gain on sale of equipment... Net cash provided by operating activities ........... boa Investing Activities Additions to property, plant, and equipment ......... Proceeds from sale of equipment .... Net cash used in investing activities .............. long & nô Financing Activities Issuance of bonds payable ..... Issuance of common stock ............ Cash dividends paid ......... Net cash provided by financing activities ........... Net increase in cash and cash equivalents .......... Beginning cash and cash equivalents ............ Ending cash and cash equivalents ............ 34 Brock Company Income Statement Net sales .......... Cost of goods sold ............. .............. Gross margin ................ ............ Selling and administrative expenses ............. Net operating income ........... Nonoperating items: Gain on sale of equipment .... Income before taxes ... Income taxes . . . . . . . . $5,200 2,980 2,220 1,801 419 423 Net income .......................... $ 275 Required: Assume that you have been asked to teach a workshop to the employees within Brock Compa- ny's Marketing Department. The purpose of your workshop is to explain how the statement of cash flows differs from the income statement. Your audience is expecting you to explain the logic underlying each number included in the statement of cash flows. Prepare a memo that explains the format of the statement of cash flows and the rationale for each number included in Brock's state- ment of cash flows.

1. Fill in the table by indicating if it is an increasing (+) or decreasing (-) transaction. Also indicate if it is an operating (O), investing (I), or financing (F), activity. + or - O, I, or F

Cash payment of dividends	2,000
Cash payment for inventory	120,650
Cash payment for expenses	61,000
Cash payment for wages	45,250
Cash payment for interest expense	925
Cash payment for purchase of equipment	25,350
Cash payment for repayment of debt	14,000
Cash collection of accounts receivable	340,500
Cash collection of interest revenue	12,500
Cash collection of dividend revenue	10,500
Cash proceeds from sale of equipment	12,000
Cash proceeds from sale of common stock	55,000

2. Using the information in the table from question 1, complete the following statement of cash flows using the direct method. List each transaction and amount under the appropriate section. Be sure to indicate if it is increasing or decreasing (+ or -). You may not need to use all of the lines.

Cash from Operating Activity	Amount








Net cash __ (provided or used) by operating activity

Cash from Investing activity	Amount




Net cash _____ (provided or used) by investing activity

Cash from Financing Activity	Amount





Net cash __ (provided or used) by financing activity

Net change in cash during period

Cash at beginning of period 27,000

Cash at end of period

whitescorpion697

AGED 260 Lecture Notes - Lecture 7: Cash Flow, Net Income, Financial Statement

Document Summary

Get access

Related Documents

AGED 260 Lecture Notes - Lecture 5: Kfc, Net Income, Earnings Before Interest And Taxes

ACCT 361 Lecture 1: Statement of Cash Flows

COMMERCE 1BA3 Lecture Notes - Lecture 5: Cash Flow Statement, Accrual, Cash Flow

Related Questions