AFM101 Study Guide - Midterm Guide: Cash Flow, Current Liability, Retained Earnings

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burgundyfish483

15 Oct 2013

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Grace Loney

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AFM101 Full Course Notes

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Cash equivalent: short-term, highly liquid investment with an original maturity of less than three months. Cash flows from operating activities: related to earnings from normal operations. Direct method of presenting the operating activities section of the stmt of cash flows reports components of cash flows from operating activities as gross receipts and gross payments. Cash inflows cash received from customers/ dividends and interest on investments. Cash outflows cash paid for purchase of goods for resale and services/ salaries/ income taxes/ interest on borrowings. Indirect method of presenting the operating activities section of the stmt of cash flows adjusts profit to compute cash flows from operating activities. Equation: profit +/- adjustments for non-cash items = net cash flow. Cash flows from investing activities: related to the acquisition or sale of productive facilities and investments in the securities of other companies. Cash inflows cash received from sale or disposal of property, plant and equipment/ sale or maturity of investments in securities.

Related Questions

Statement of Cash FlowsâIndirect Method

The comparative balance sheet of Mavenir Technologies Inc. for December 31, 2014 and 2013, is shown as follows:

		Dec. 31, 2014	Dec. 31, 2013
Assets
Cash		$246,880	$232,300
Accounts receivable (net)		89,440	83,430
Inventories		252,460	247,030
Investments		0	95,700
Land		129,500	0
Equipment		278,560	218,400
Accumulated depreciation-equipment		(65,210)	(58,890)
	Total	$931,630	$817,970

Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$168,630	$161,140
Accrued expenses payable (operating expenses)		16,770	21,270
Dividends payable		9,320	7,360
Common stock, $10 par		50,310	40,080
Paid-in capital in excess of par-common stock		189,120	111,240
Retained earnings		497,480	476,880
	Total	$931,630	$817,970

The following additional information was taken from the records:

The investments were sold for $111,970 cash.

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The common stock was issued for cash.

There was a $59,040 credit to Retained Earnings for net income.

There was a $38,440 debit to Retained Earnings for cash dividends declared.

Required:

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Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required.

Mavenir Technologies Inc.

Statement of Cash Flows

For the Year Ended December 31, 2014

Cash flows from operating activities:

Adjustments to reconcile net income to net cash flow from operating activities:

Changes in current operating assets and liabilities:

Net cash flow from operating activities

Cash flows from investing activities:

Net cash flow used for investing activities

Cash flows from financing activities:

Net cash flow provided by financing activities

Cash at beginning of the year

Cash at end of the year

taupegnat329

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows:

		Dec. 31, 20Y9	Dec. 31, 20Y8
Assets
Cash		$266,740	$248,130
Accounts receivable (net)		96,630	89,120
Inventories		272,790	263,860
Investments		0	102,220
Land		139,910	0
Equipment		300,960	233,280
Accumulated depreciationâequipment		(70,460)	(62,910)
	Total assets	$1,006,570	$873,700

Liabilities and Stockholders' Equity
Accounts payable		$182,190	$172,120
Accrued expenses payable		18,120	22,720
Dividends payable		10,070	7,860
Common stock, $10 par		54,350	42,810
Paid-in capital: Excess of issue price over par-common stock		204,330	118,820
Retained earnings		537,510	509,370
	Total liabilities and stockholdersâ equity	$1,006,570	$873,700

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $92,000 cash.

The common stock was issued for cash.

There was a $69,200 credit to Retained Earnings for net income.

There was a $41,060 debit to Retained Earnings for cash dividends declared.

Required:

Merrick Equipment Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:


Changes in current operating assets and liabilities:




Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
	$


Net cash flow used for investing activities
Cash flows from (used for) financing activities:


Net cash flow from financing activities
		$
Cash at the beginning of the year
Cash at the end of the year		$

ivoryreindeer300

Statement of Cash FlowsâIndirect Method

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows:

		Dec. 31, 20Y9	Dec. 31, 20Y8
Assets
Cash		$245,600	$227,150
Accounts receivable (net)		88,970	81,580
Inventories		251,170	241,550
Investments		0	93,580
Land		128,820	0
Equipment		277,110	213,550
Accumulated depreciationâequipment		(64,880)	(57,590)
	Total assets	$926,790	$799,820

Liabilities and Stockholders' Equity
Accounts payable		$167,750	$157,560
Accrued expenses payable		16,680	20,800
Dividends payable		9,270	7,200
Common stock, $10 par		50,050	39,190
Paid-in capital: Excess of issue price over par-common stock		188,140	108,780
Retained earnings		494,900	466,290
	Total liabilities and stockholdersâ equity	$926,790	$799,820

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

Equipment and land were acquired for cash.

There were no disposals of equipment during the year.

The investments were sold for $84,220 cash.

The common stock was issued for cash.

There was a $66,200 credit to Retained Earnings for net income.

There was a $37,590 debit to Retained Earnings for cash dividends declared.

Required:

Merrick Equipment Co.
Statement of Cash Flows
For the Year Ended December 31, 20Y9
Cash flows from operating activities:
Net income	$
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation
Loss on sale of investments
Changes in current operating assets and liabilities:
Increase in accounts receivable
Increase in inventories
Increase in accounts payable
Decrease in accrued expenses payable
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
Cash from sale of investments	$
Cash used for purchase of land
Cash used for purchase of equipment
Net cash flow used for investing activities
Cash flows from (used for) financing activities:
Cash from sale of common stock
Cash used for dividends
Net cash flow from financing activities
Increase in cash		$
Cash at the beginning of the year
Cash at the end of the year		$

viridiansardine155

AFM101 Study Guide - Midterm Guide: Cash Flow, Current Liability, Retained Earnings

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