ACCT 540 Study Guide - Final Guide: Cash Flow, Net Income, Income Statement

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beigesheep427

31 Mar 2019

School

Binghamton University

Department

Accounting

Course

ACCT 540

Professor

naan

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Document Summary

There are three classifications in the statement of cash flows: operating, investing and financing cash flows. Operating cash flows contains all the cash receipts and disbursements from transactions relating to the income statement and the current assets and liabilities. They involve activities to produce goods and delivering services to customers. Net income needs to be reconciled to net cash provided by operating activities with direct or indirect method. The investing cash flow encompasses all the transactions related to non-current assets. Financing cash flow activities relate to debt (including non-current liabilities) and equity, such as issuing stock or bonds. Question 2: generally, the indirect method of preparing the operating cash flows is used. List 1 advantage and 1 disadvantage to this method as compared to the direct method. Net income needs to be reconciled to net cash provided by operating activities. The result is the same, but the format is different.

Related Questions

Natalie Daniels has completed the basic format to be used inpreparing the statement of cash flows (indirect method) for CPUHardware Designers. All amounts are in thousands (000s).

CPU HARDWARE DESIGNERS Statement of Cash Flows For the year ended December 31, 2015
Cash Flows fromOperating Activities
Netincome
Adjustments for noncash effects:
Changesin current assets and current liabilities:
Net cash flows from operatingactivities
Cash Flows fromInvesting Activities
Netcash flows from investing activities
Cash Flows fromFinancing Activities
Net cash flows from financingactivities
Net increase(decrease) in cash	$	(28,000)
Cash at thebeginning of the period		90,000

Cash at the end ofthe period	$	62,000

Below, in random order, are line items to be included in thestatement of cash flows.


Cash received fromthe sale of land	$ 4,000
Issuance of commonstock	300,000
Depreciationexpense	30,000
Increase in accountsreceivable	70,000
Increase in accountspayable	11,000
Loss on sale ofland	8,000
Purchase ofequipment	230,000
Increase ininventory	40,000
Increase in prepaidrent	11,000
Payment ofdividends	50,000
Net income	80,000
Repayment of notespayable	60,000

Required:

Prepare the statement of cash flows for CPU Hardware Designersusing the indirect method. (List cash outflows and any decrease in cashas negative amounts. Enter your answers inthousands.)

CPU HARDWARE DESIGNERS
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash Flows from Operating Activities:

Adjustments to reconcile net income to net cash flows fromoperating activities








Net cash flows from operating activities		$0
Cash Flows from Investing Activities:




Net cash flows from investing activities		0
Cash Flows from Financing Activities:





Net cash flows from financing activities		0

Cash at the beginning of the period
Cash at the end of the period		$0

mauvesnail91

Statement of Changes in Financial Position

A. From the perspective of an investor, determine whether or notyou would invest in Target Corporation based onthe company's statement of changes in financial position (SCFP).Support your opinion.

B. Review Target Corporation's SCFP for any concerns that mayneed to be addressed. As controller of Target Corporation, preparea memo to your CEO, giving a summary report for possiblerecommendations.

Cash flow statement


	Period Ending	1/28/2017	1/30/2016



Cash Flow Statement

Net Income		$2,737,000	$3,363,000
Cash Flow-Operating Activities
Depreciation		$2,298,000	$2,213,000
Net Income Adjustments		$508,000	($812,000)
Changes in Operating Activities
Accounts Receivable		$0	$0
Changes in Inventories		$293,000	($316,000)
Other Operating Activities		$36,000	$227,000
Liabilities		($543,000)	$579,000
Net Cash Flow-Operating		$5,436,000	$5,958,000
Cash flows-Investing Activities
Capital Expenditures		($1,547,000)	($1,438,000)
Investments		$28,000	$24,000
Other Investing Activities		$46,000	$1,922,000
Net Cash Flows-Investing		($1,473,000)	$508,000
Cash Flows-Financing Activities
Sale and Purchase of Stock		($3,485,000)	($3,183,000)
Net Borrowings		($664,000)	($85,000)
Other Financing Activities		$0	$0
Net Cash Flows-Financing		($5,497,000)	($4,630,000)
Effect of Exchange Rate		$0	$0
Net Cash Flow		($1,534,000)	$1,836,000


Financial Ratios
Liquidity Ratios
Current Ratio		94%	112%
Quick Ratio		29%	44%
Cash Ratio		20%	32%
Profitability Ratio
Gross Margin		30%	30%
Operating Margin		7%	7%
Pre-Tax Margin		6%	7%
Profit Margin		4%	5%

(www.nasdaq.com)

The balance sheet for Plasma Screens Corporation along with additional information, are provided below:

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2018 and 2017
	2018		2017
Assets:
Current assets:
Cash	$	82,000	$	120,000
Accounts receivable		72,000		96,000
Inventory		65,000		80,000
Prepaid rent		5,000		4,000
Long-term assets:
Land		500,000		500,000
Equipment		800,000		600,000
Accumulated depreciation		(380,000)		(300,000)

Total assets	$	1,144,000	$	1,100,000

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	78,000	$	82,000
Interest payable		5,000		9,000
Income tax payable		9,000		7,000
Long-term liabilities:
Notes payable		75,000		150,000
Stockholders' equity:
Common stock		600,000		600,000
Retained earnings		377,000		252,000

Total liabilities and stockholders' equity	$	1,144,000	$	1,100,000

Additional Information for 2018:

1. Net income is $160,000.

2. The company purchases $200,000 in equipment.

3. Depreciation expense is $80,000.

4. The company repays $75,000 in notes payable.

5. The company declares and pays a cash dividend of $35,000.

Prepare the statement of cash flows using the indirect method.

PLASMA SCREENS CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2018
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash flows from operating activities:









Net cash flows from operating activities
Cash Flows from Investing Activities




Net cash flows from investing activities
Cash Flows from Financing Activities




Net cash flows from financing activities

Cash at the beginning of the period
Cash at the end of the period

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ACCT 540 Study Guide - Final Guide: Cash Flow, Net Income, Income Statement

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