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

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Presentation on theme: "The Statement of Cash Flows Chapter 14 Demonstration Problems 14-1Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall."— Presentation transcript:

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

2 14-2 The cash flow statement categorizes like transactions for optimal reporting. E14-18D 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)

3 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-3 E14-18D 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 landh.Cash purchase of property b.Issuance of note payablei.Decrease in Salaries Payable c.Decrease in Prepaid Expensesj.Cash payment of notes payable d.Decrease in accrued liabilityk.Issuance of stock for cash e.Increase in Income Tax Payablel.Increase in Accounts Receivable f.Decrease in Accounts Payablem.Decrease in Accounts Receivable g.Decrease in Dividends Receivablen.Payment of stock dividend

4 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-4 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+

5 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-5 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+

6 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-6 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+

7 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-7 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO−

8 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-8 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+

9 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-9 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO−

10 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-10 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+

11 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-11 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+ h.Cash purchase of propertyI−

12 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-12 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+ h.Cash purchase of propertyI− i.Decrease in Salaries PayableO−

13 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-13 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+ h.Cash purchase of propertyI− i.Decrease in Salaries PayableO− j.Cash payment of notes payableF−

14 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-14 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+ h.Cash purchase of propertyI− i.Decrease in Salaries PayableO− j.Cash payment of notes payableF− k.Issuance of stock for cashF+

15 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-15 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+ h.Cash purchase of propertyI− i.Decrease in Salaries PayableO− j.Cash payment of notes payableF− k.Issuance of stock for cashF+ l.Increase in Accounts ReceivableO−

16 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-16 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+ h.Cash purchase of propertyI− i.Decrease in Salaries PayableO− j.Cash payment of notes payableF− k.Issuance of stock for cashF+ l.Increase in Accounts ReceivableO− m.Decrease in Accounts ReceivableO+

17 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-17 E14-18D TransactionsCategoryIncrease(decrease) a.Gain on sale of landO+ b.Issuance of note payableF+ c.Decrease in Prepaid ExpensesO+ d.Decrease in accrued liabilityO− e.Increase in Income Tax PayableO+ f.Decrease in Accounts PayableO− g.Decrease in Dividends ReceivableO+ h.Cash purchase of propertyI− i.Decrease in Salaries PayableO− j.Cash payment of notes payableF− k.Issuance of stock for cashF+ l.Increase in Accounts ReceivableO− m.Decrease in Accounts ReceivableO+ n.Payment of stock dividendN

18 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-18 The records of Ciesto, Inc. reveal the following: E14-19D Requirement Compute cash flows from operating activities by the indirect method for year ended December 31, Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000

19 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-19 E14-19D Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000 CIESTO, INC. Statement of Cash Flows—Partial Year Ended December 31, 2014 Cash Flows from Operating Activities: Net Income $60,000

20 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-20 E14-19D Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000 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

21 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-21 E14-19D Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000 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

22 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-22 E14-19D Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000 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﴿

23 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-23 E14-19D Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000 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﴿

24 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-24 E14-19D Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000 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﴿

25 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-25 E14-19D Net income$60,000 Sales revenue82,000 Loss on sale of land6,000 Acquisition of land45,000 Depreciation expense4,500 Decrease in current liabilities35,000 Increase in current assets other than cash20,000 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

26 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-26 Vision, Inc. identified the following selected transactions that occurred during 2015: E14-25D 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. 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.

27 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-27 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 b. Issued 10,000 shares of $1 par common stock for a building with a fair market value of $100,000.

28 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-28 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 c. Purchased new truck with a fair market value of $45,000. Financed it 100% with a long-term note.

29 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-29 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 Note45,000 Payment of Short-term Note by issuing Common Stock20,000 d. Paid short-term notes of $20,000 by issuing 2,000 shares of $3 par common Stock.

30 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall14-30 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

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


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