AFA 300 Chapter Notes - Chapter 5: Petty Cash, Cash Cash, Cash Flow
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The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form.
| 1 | Year 2 | Year 1 | |
| 2 | Cash | $53,000.00 | $50,000.00 |
| 3 | Accounts Receivable (net) | 37,000.00 | 48,000.00 |
| 4 | Inventories | 108,500.00 | 100,000.00 |
| 5 | Investments | 70,000.00 | |
| 6 | Equipment | 573,200.00 | 450,000.00 |
| 7 | Accumulated Depreciation-Equipment | (142,000.00) | (176,000.00) |
| 8 | $629,700.00 | $542,000.00 | |
| 9 | Accounts Payable | $62,500.00 | $43,800.00 |
| 10 | Bonds Payable, Due Year 2 | 100,000.00 | |
| 11 | Common Stock, $10 par | 325,000.00 | 285,000.00 |
| 12 | Paid-In Capital in Excess of ParâCommon Stock | 80,000.00 | 55,000.00 |
| 13 | Retained Earnings | 162,200.00 | 58,200.00 |
| 14 | $629,700.00 | $542,000.00 |
The income statement for the current year is as follows:
| 1 | Sales | $625,700.00 | |
| 2 | Cost of merchandise sold | 340,000.00 | |
| 3 | Gross profit | $285,700.00 | |
| 4 | Operating expenses: | ||
| 5 | Depreciation expense | $26,000.00 | |
| 6 | Other operating expenses | 68,000.00 | 94,000.00 |
| 7 | Income from operations | $191,700.00 | |
| 8 | Other revenue and expense: | ||
| 9 | Gain on sale of investment | $4,000.00 | |
| 10 | Interest expense | (6,000.00) | (2,000.00) |
| 11 | Income before income tax | $189,700.00 | |
| 12 | Income tax | 60,700.00 | |
| 13 | Net income | $129,000.00 |
Additional data for the current year are as follows:
| (a) | Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200. |
| (b) | Bonds payable for $100,000 were retired by payment at their face amount. |
| (c) | 5,000 shares of common stock were issued at $13 for cash. |
| (d) | Cash dividends declared and paid, $25,000. |
Required:
| Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. |
Labels and Amount Descriptions
| Labels | |
| For the Year Ended December 31, Year 2 | |
| Amount Descriptions | |
| Cash from sale of common stock | |
| Cash from sale of investments | |
| Cash paid for dividends | |
| Cash paid for purchase of equipment | |
| Cash paid to retire bonds payable | |
| Decrease in accounts payable | |
| Decrease in accounts receivable | |
| Decrease in cash | |
| Decrease in inventories | |
| Depreciation | |
| Gain on sale of investment | |
| Increase in accounts payable | |
| Increase in accounts receivable | |
| Increase in cash | |
| Increase in inventories | |
| Loss on sale of investment | |
| Net cash flow from financing activities | |
| Net cash flow from investing activities | |
| Net cash flow from operating activities | |
| Net cash flow used for financing activities | |
| Net cash flow used for investing activities | |
| Net cash flow used for operating activities | |
| Net income | |
| Net loss |
Statement of Cash Flows
Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
| Posner Company |
| Statement of Cash Flows |
| 1 | Cash flows from operating activities: | ||
| 2 | |||
| 3 | Adjustments to reconcile net income to net cash flow from operating activities: | ||
| 4 | |||
| 5 | |||
| 6 | Changes in current operating assets and liabilities: | ||
| 7 | |||
| 8 | |||
| 9 | |||
| 10 | |||
| 11 | Cash flows from investing activities: | ||
| 12 | |||
| 13 | |||
| 14 | |||
| 15 | Cash flows from financing activities: | ||
| 16 | |||
| 17 | |||
| 18 | |||
| 19 | |||
| 20 | |||
| 21 | Cash at the beginning of the year | ||
| 22 | Cash at the end of the year |
The comparative balance sheets of Posner Company, for Years 1and 2 ended December 31, appear below in condensed form.
1 | Year 2 | Year 1 | |
2 | Cash | $53,000.00 | $50,000.00 |
3 | Accounts Receivable (net) | 37,000.00 | 48,000.00 |
4 | Inventories | 108,500.00 | 100,000.00 |
5 | Investments | 70,000.00 | |
6 | Equipment | 573,200.00 | 450,000.00 |
7 | Accumulated Depreciation-Equipment | (142,000.00) | (176,000.00) |
8 | $629,700.00 | $542,000.00 | |
9 | Accounts Payable | $62,500.00 | $43,800.00 |
10 | Bonds Payable, Due Year 2 | 100,000.00 | |
11 | Common Stock, $10 par | 325,000.00 | 285,000.00 |
12 | Paid-In Capital in Excess of ParâCommon Stock | 80,000.00 | 55,000.00 |
13 | Retained Earnings | 162,200.00 | 58,200.00 |
14 | $629,700.00 | $542,000.00 |
The income statement for the current year is as follows:
1 | Sales | $625,700.00 | |
2 | Cost of merchandise sold | 340,000.00 | |
3 | Gross profit | $285,700.00 | |
4 | Operating expenses: | ||
5 | Depreciation expense | $26,000.00 | |
6 | Other operating expenses | 68,000.00 | 94,000.00 |
7 | Income from operations | $191,700.00 | |
8 | Other revenue and expense: | ||
9 | Gain on sale of investment | $4,000.00 | |
10 | Interest expense | (6,000.00) | (2,000.00) |
11 | Income before income tax | $189,700.00 | |
12 | Income tax | 60,700.00 | |
13 | Net income | $129,000.00 |
Additional data for the current year are as follows:
| (a) | Fully depreciated equipment costing$60,000 was scrapped, no salvage, and new equipment was purchasedfor $183,200. |
| (b) | Bonds payable for $100,000 wereretired by payment at their face amount. |
| (c) | 5,000 shares of common stock wereissued at $13 for cash. |
| (d) | Cash dividends declared and paid,$25,000. |
Required:
| Prepare a statement of cash flows using the indirect methodof reporting cash flows from operating activities. Refer to theLabels and Amount Descriptions list provided for the exact wordingof the answer choices for text entries. Be sure to complete theheading of the statement. Use the minus sign to indicate cashoutflows, cash payments, decreases in cash, or any negativeadjustments. Prepare a statement of cash flows using the indirect method ofreporting cash flows from operating activities. Refer to the Labelsand Amount Descriptions list provided for the exact wording of theanswer choices for text entries. Be sure to complete the heading ofthe statement. Use the minus sign to indicate cash outflows, cashpayments, decreases in cash, or any negative adjustments.
|
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?
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