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Statement of Cash Flows Revisited PowerPoint Presentation
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Statement of Cash Flows Revisited

Statement of Cash Flows Revisited

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Statement of Cash Flows Revisited

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    1. Statement of Cash Flows Revisited CHAPTER 22

    3. Role of the Statement of Cash Flows The Statement helps users assess . . . a firms ability to generate cash. a firms ability to meet its obligations. the reasons for differences between income and associated cash flows. the effect of cash and noncash investing and financing activities on a firms financial position.

    4. Statement of Cash Flows . . . . . . is required by SFAS No. 95.

    5. Cash and Cash Equivalents Short-term, highly liquid investments. Readily convertible into known, fixed amounts of cash. So near maturity that there is insignificant risk of market value fluctuation from interest rate changes.

    6. Primary Elements of the Statement of Cash Flows (SCF)

    7. Cash Flows From Operating Activities Inflows Receipts from customers Interest received Dividends received Refunds from suppliers Revenues received in advance Outflows Payments to suppliers Payments to employees Interest payments Income tax payments

    8. Cash Flows From Investing Activities Inflows Proceeds from plant assets sales Proceeds from sales and maturities of debt and equity securities Collections of loan principal Sale of real estate Outflows Payments to purchase plant assets Purchases of debt and equity securities Loans to others Payments to purchase real estate

    9. Cash Flows From Financing Activities Inflows Proceeds from debt for specific investing activities Proceeds from loans from financial institutions Proceeds from issuance of stock Outflows Dividends paid to stockholders Principal payments on loans from financial institutions

    10. SFAS No. 95 Requirements Noncash Activities Disclosure is required for significant noncash investing and financing activities. Disclosure should appear in a supporting schedule to the Statement of Cash Flows or in the Notes to the Financial Statements.

    11. Common noncash activities include: SFAS No. 95 Requirements Noncash Activities

    12. Preparing the Statement of Cash Flows

    14. Direct Method Analyzing Sales Revenue The key information is cash collected from customers. Can be computed two ways: Obtained from cash receipts journal. Obtained from accrual sales information.

    15. Analyzing Sales Question Accounts Receivable was $40,000 on 1/1/99, and $52,000 on 12/31/99. If total sales revenue for 1999 was $800,000, then how much cash was received from customers? a. $800,000 b. $760,000 c. $812,000 d. $788,000

    16. Accounts Receivable was $40,000 on 1/1/99, and $52,000 on 12/31/99. If total sales revenue for 1999 was $800,000, then how much cash was received from customers? a. $800,000 b. $760,000 c. $812,000 d. $788,000 Analyzing Sales Question

    17. Direct Method Gains and Losses on Sale of Assets Gains and losses do not appear on the Statement of Cash Flows using the Direct Method.

    18. Direct Method Cost of Goods Sold Payments can be found in the purchases journal. assuming accounts payable is used to purchase inventory. Payments can be inferred:

    19. Cost of Goods Sold Question Examine the following information and determine how much was paid for inventory in 2001. a. $900,000 b. $923,000 c. $947,000 d. $877,000

    20. Examine the following information and determine how much was paid for inventory in 2001. a. $900,000 b. $923,000 c. $947,000 d. $877,000 Cost of Goods Sold Question

    21. Direct Method Salaries Expense Payments can be pulled from the payroll journal. Cash paid to employees can be computed from the accrual-basis expense.

    22. Salary Expense for 2001 was $700,000. Salary Payable was $35,000 on 12/31/00 and $10,000 on 12/31/01. How much cash was paid to employees in 2001? a. $700,000 b. $735,000 c. $725,000 d. $675,000 Salaries Expense Question

    23. Salary Expense for 2001 was $700,000. Salary Payable was $35,000 on 12/31/00 and $10,000 on 12/31/01. How much cash was paid to employees in 2001? a. $700,000 b. $735,000 c. $725,000 d. $675,000 Salaries Expense Question

    24. Direct Method Estimated Expenses Depreciation, Amortization, and Depletion Expenses Operating cash flows are not involved. They are not disclosed in the SCF using the direct method.

    25. Direct Method Deferred Revenue Receipts can be found in the cash receipts journal. Receipts can also be inferred:

    26. Direct Method Prepaid Expenses Payments can be found in the cash disbursements journal. Payments can be inferred:

    28. Using the direct method, prepare a Statement of Cash Flows for the year ended 1999. Examine the following information . . . Statement of Cash Flows Direct Method Example

    29. Statement of Cash Flows Direct Method Example

    30. Statement of Cash Flows Direct Method Example

    31. Statement of Cash Flows Direct Method Example

    32. Statement of Cash Flows Direct Method Example Additional Information for 1999: Trading Securities were purchased at a cost of $25,000. Equipment with a book value of $40,000 was sold during the year for $43,000. Uninsured equipment with a book value of $30,000 was destroyed during a freak flood. Bond premium amortization was $1,000.

    33. Additional Information for 1999: Grate Big holds a 25% investment in Tiny Co. and uses the Equity Method. Grate Big received $10,000 in dividends from Tiny Co. Grate Bigs tax rate is 40%. The Notes Payable to Bobs Bank carry a 12% rate. The payments are due on the first day of each month. Statement of Cash Flows Direct Method Example

    34. Additional Information for 1999: The Bonds Payable carry a 9% interest rate. Interest is payable semiannually on July 1 and on January 1. The company sold stock during the year for $50,000 cash. Statement of Cash Flows Direct Method Example

    35. Cash Received from Customers Cash Paid to Employees Statement of Cash Flows Direct Method Example

    36. Cash Paid for Inventory Cash Paid for Interest Statement of Cash Flows Direct Method Example

    37. Cash Paid for Taxes Other Operating Cash Flows Statement of Cash Flows Direct Method Example

    38. Cash Flows From Operating Activities Statement of Cash Flows Direct Method Example

    40. Statement of Cash Flows Supplemental Schedule

    41. Operating Cash Flows Indirect Method Net cash flows from operating activities are determined by starting with net income. adjusting for items that reconcile net income to operating cash flows. Individual operating cash flows are not disclosed.

    42. Indirect Method Working Capital Accounts

    43. Indirect Method Other Reconciling Items Add to net income: Depreciation, depletion, and amortization expenses Losses Noncash expenses Subtract from net income: Bond premium amortization Gains Noncash revenues

    45. Prepare a Statement of Cash Flows for the period ending December 31, 1999 using the Indirect Method. Refer to the following information . . . Statement of Cash Flows Indirect Method Example

    46. Statement of Cash Flows Indirect Method Example

    47. Statement of Cash Flows Indirect Method Example

    48. Statement of Cash Flows Indirect Method Example

    49. Statement of Cash Flows Indirect Method Example Additional Information for 1999: Trading Securities were purchased at a cost of $25,000. Equipment with a book value of $40,000 was sold during the year for $43,000. Uninsured equipment with a book value of $30,000 was destroyed during a freak flood. Bond premium amortization was $1,000.

    50. Statement of Cash Flows Indirect Method Example Additional Information for 1999: Grate Big holds a 25% investment in Tiny Co. and uses the Equity Method. Grate Big received $10,000 in dividends from Tiny Co. Grate Bigs tax rate is 40%. The Notes Payable to Bobs Bank carry a 12% rate. The payments are due on the first day of each month.

    51. Statement of Cash Flows Indirect Method Example Additional Information for 1999: The Bonds Payable carry a 9% interest rate. Interest is payable semiannually on July 1 and on January 1. The company sold stock during the year for $50,000 cash.

    52. Statement of Cash Flows Indirect Method Example

    53. Statement of Cash Flows Indirect Method Example

    54. Statement of Cash Flows Indirect Method Example

    55. Statement of Cash Flows Indirect Method Example

    56. Statement of Cash Flows Indirect Method Example

    57. Grate Big Company Statement of Cash Flows For the Period Ending December 31, 1999

    58. End of Chapter 22