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The Statement of Cash Flows

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1 The Statement of Cash Flows
Chapter 14 Demonstration Problems Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

2 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
The cash flow statement categorizes like transactions for optimal reporting. Identify each of the following transactions as one of the following: Operating activity (O) Investing activity (I) Financing activity (F) Non-cash investing and financing activity (NIF) Transaction that is not reported on the statement of cash flows (N) Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

3 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
For each cash flow, indicate whether the item increases (+) or decreases (-) cash. The indirect method is used to report cash flows from operating activities. a. Gain on sale of land h. Cash purchase of property b. Issuance of note payable i. Decrease in Salaries Payable c. Decrease in Prepaid Expenses j. Cash payment of notes payable d. Decrease in accrued liability k. Issuance of stock for cash e. Increase in Income Tax Payable l. Increase in Accounts Receivable f. Decrease in Accounts Payable m. Decrease in Accounts Receivable g. Decrease in Dividends Receivable n. Payment of stock dividend Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

4 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

5 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

6 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

7 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

8 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

9 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

10 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

11 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable h. Cash purchase of property I Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

12 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable h. Cash purchase of property I i. Decrease in Salaries Payable Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

13 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable h. Cash purchase of property I i. Decrease in Salaries Payable j. Cash payment of notes payable Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

14 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable h. Cash purchase of property I i. Decrease in Salaries Payable j. Cash payment of notes payable k. Issuance of stock for cash Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

15 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable h. Cash purchase of property I i. Decrease in Salaries Payable j. Cash payment of notes payable k. Issuance of stock for cash l. Increase in Accounts Receivable Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

16 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable h. Cash purchase of property I i. Decrease in Salaries Payable j. Cash payment of notes payable k. Issuance of stock for cash l. Increase in Accounts Receivable m. Decrease in Accounts Receivable Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

17 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Transactions Category Increase(decrease) a. Gain on sale of land O + b. Issuance of note payable F c. Decrease in Prepaid Expenses d. Decrease in accrued liability e. Increase in Income Tax Payable f. Decrease in Accounts Payable g. Decrease in Dividends Receivable h. Cash purchase of property I i. Decrease in Salaries Payable j. Cash payment of notes payable k. Issuance of stock for cash l. Increase in Accounts Receivable m. Decrease in Accounts Receivable n. Payment of stock dividend N Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

18 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
The records of Ciesto, Inc. reveal the following: Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 Requirement Compute cash flows from operating activities by the indirect method for year ended December 31, 2014. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

19 E14-19D CIESTO, INC. Statement of Cash Flows—Partial
Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

20 E14-19D CIESTO, INC. Statement of Cash Flows—Partial
Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense $4,500 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

21 E14-19D CIESTO, INC. Statement of Cash Flows—Partial
Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense $4,500 Loss on Sale of Land 6,000 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

22 E14-19D CIESTO, INC. Statement of Cash Flows—Partial
Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense $4,500 Loss on Sale of Land 6,000 Increase in current assets other than cash ﴾20,000﴿ Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

23 E14-19D CIESTO, INC. Statement of Cash Flows—Partial
Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense $4,500 Loss on Sale of Land 6,000 Increase in current assets other than cash ﴾20,000﴿ Decrease in current liabilities ﴾35,000﴿ Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

24 E14-19D CIESTO, INC. Statement of Cash Flows—Partial
Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense $4,500 Loss on Sale of Land 6,000 Increase in current assets other than cash ﴾20,000﴿ Decrease in current liabilities ﴾35,000﴿ ﴾44,500﴿ Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

25 E14-19D CIESTO, INC. Statement of Cash Flows—Partial
Net income $60,000 Sales revenue 82,000 Loss on sale of land 6,000 Acquisition of land 45,000 Depreciation expense 4,500 Decrease in current liabilities 35,000 Increase in current assets other than cash 20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation Expense $4,500 Loss on Sale of Land 6,000 Increase in current assets other than cash ﴾20,000﴿ Decrease in current liabilities ﴾35,000﴿ ﴾44,500﴿ Net Cash Provided by Operating Activities $15,500 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

26 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
Vision, Inc. identified the following selected transactions that occurred during 2015: a. Issued 5,000 shares of $1 par common stock for cash of $30,000. b. Issued 10,000 shares of $1 par common stock for a building with a fair market value of $100,000. c. Purchased new truck with a fair market value of $45,000. Financed it 100% with a long-term note. d. Paid short-term notes of $20,000 by issuing 2,000 shares of $3 par common Stock. e. Paid long-term note of $15,000 to Bank of Tallahassee. Issued new long-term note of $30,000 to Bank of Trust. Requirement Identify any non-cash transactions that occurred during the year and show how they would be reported in the non-cash section of the cash flow statement. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

27 E14-25D VISION, INC. Statement of Cash Flows—Partial
b. Issued 10,000 shares of $1 par common stock for a building with a fair market value of $100,000. VISION, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Non-cash Investing and Financing Activities: Acquisition of a Building by issuing Common Stock $100,000 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

28 E14-25D VISION, INC. Statement of Cash Flows—Partial
c. Purchased new truck with a fair market value of $45,000. Financed it 100% with a long-term note. VISION, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Non-cash Investing and Financing Activities: Acquisition of a Building by issuing Common Stock $100,000 Acquisition of a Truck by issuing a Long-Term Note 45,000 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

29 E14-25D VISION, INC. Statement of Cash Flows—Partial
d. Paid short-term notes of $20,000 by issuing 2,000 shares of $3 par common Stock. VISION, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Non-cash Investing and Financing Activities: Acquisition of a Building by issuing Common Stock $100,000 Acquisition of a Truck by issuing a Long-Term Note 45,000 Payment of Short-term Note by issuing Common Stock 20,000 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

30 E14-25D VISION, INC. Statement of Cash Flows—Partial
Year Ended December 31, 2014 Non-cash Investing and Financing Activities: Acquisition of a Building by issuing Common Stock $100,000 Acquisition of a Truck by issuing a Long-Term Note 45,000 Payment of Short-term Note by issuing Common Stock 20,000 Total Non-cash Investing and Financing Activities $165,000 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

31 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
End of Chapter 14 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall


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