1. The Statement of Cash Flows Presentations for Chapter 14 by Glenn Owen

2. Key Points The structure and format of the statement of cash flows. Cash flows from operating, investing, and financing activities. How the statement of cash flows complements the other financial statements and how it can be used by those interested in the financial condition of a company. Important investing and financing transactions that do not appear on the statement of cash flows and how they are reported. Economic consequences associated with the statement of cash flows. Preparing a statement of cash flows from the information contained in two balance sheets, an income statement, and a statement of retained earnings.

3. General Description of the Statement of Cash Flows Cash provided (used) by operating activities – Cash inflows and outflows associated with the acquisition and sale of the company’s inventories and services Cash provided (used) by investing activities – Cash inflows and outflows associated with the purchase and sale of a company’s noncurrent assets Cash provided (used) by financing activities – Cash inflows and outflows associated with a company’s two sources of outside capital: liabilities and contributed capital

4. Determining Cash Inflow from Sales Sales Allowance for Doubtful Accounts Bad Debt Expense Accounts Receivable 12,00 0 1,000

5. Determining Cash Inflow from Sales Sales 32,000 Allowance for Doubtful Accounts Bad Debt Expense (1) Accounts Receivable 12,00 0 32,00 0 (1) (1) Sales on account 1,000

6. Determining Cash Inflow from Sales Sales 32,000 Allowance for Doubtful Accounts 1,000 1,100 Bad Debt Expense 1,100 (1) (2) Accounts Receivable 12,00 0 32,00 0 (1) (2) (1) Sales on account (2) Estimated allowance

7. Determining Cash Inflow from Sales Sales 32,000 Accounts Receivable 12,00 0 32,00 0 800 Allowance for Doubtful Accounts 800 1,000 1,100 1,300 1,100 (1) (2) (3) (1) (2) (1) Sales on account (2) Estimated allowance (3) Write-off of accounts receivable Bad Debt Expense

8. Determining Cash Inflow from Sales Sales 32,000 Accounts Receivable 12,00 0 32,00 0 23,20 0 800 20,000 Allowance for Doubtful Accounts 800 1,000 1,100 1,300 Bad Debt Expense 1,100 (1) Sales on account (2) Estimated allowance (3) Write-off of accounts receivable (4) Collection on account (1) (2) (3) (4) (3) (2) Cash inflow from sales = $20,000 (4)

9. Determining Cash Paid to Suppliers Cost of Goods SoldInventory Accounts Payable 3,000 12,000

10. Determining Cash Paid to Suppliers Cost of Goods Sold 11,000 Inventory 3,000 11,000 Accounts Payable (1) 12,000 (1) Sales

11. Determining Cash Paid to Suppliers Cost of Goods Sold 11,000 Inventory 3,000 12,00 0 11,000 Accounts Payable 12,000 (1) (2) (1) Sales(2) Inventory purchase on account

12. Determining Cash Paid to Suppliers Cost of Goods Sold 11,000 Inventory 3,000 12,00 0 4,000 11,000 Accounts Payable 15,00 0 12,000 9,000 (1) Sales(2) Inventory purchase (3) Payment on account. on account (1) (2) (3) Cash paid to suppliers = $15,000 (3)

13. Determining Cash Inflow from Sale of Machinery Loss on Sale of Machinery Machinery 8,000 Accumulated Depreciation 2,000 Depreciation Expense

14. Determining Cash Inflow from Sale of Machinery Loss on Sale of Machinery Machinery 8,000 Accumulated Depreciation 2,000 1,000 Depreciation Expense 1,000 (1) (1) Depreciation

15. Determining Cash Inflow from Sale of Machinery Loss on Sale of Machinery 100 Machinery 8,000 6,000 2,000 Accumulated Depreciation 500 2,000 1,000 2,500 Depreciation Expense 1,000 (1) Depreciation (2) Sale of machinery for a loss (2) (1) (2) Cash inflow from machinery = $1,400 (2)

16. Review Problem Operating Cash Flows Income StatementAdjustments/Operating ExplanationsCash Flows

17. Review Problem Operating Cash Flows Income StatementAdjustments/Operating ExplanationsCash Flows Sales$55,000 (500) [increase in a/r]$54,500

18. Review Problem Operating Cash Flows Income StatementAdjustments/Operating ExplanationsCash Flows Sales$55,000 (500) [increase in a/r]$54,500 COGS(35,000)(2,500) [increase in inv.] +3,500 [increase in a/p] (34,000)

19. Review Problem Operating Cash Flows Income StatementAdjustments/Operating ExplanationsCash Flows Sales$55,000 (500) [increase in a/r]$54,500 COGS(35,000)(2,500) [increase in inv.] +3,500 [increase in a/p] (34,000) Rent(2,000)(1,000) [increase in pp rent](3,000) Interest(2,000)(500) [decrease in premium](2,500) Misc.(9,000)(3,000) [decrease in other pay](12,000) Depreciation(5,000)[no cash effect]0 Amortization(1,000)[no cash effect]0 Gain1,000 [no cash effect]0

20. Review Problem Operating Cash Flows Income StatementAdjustments/Operating ExplanationsCash Flows Sales$55,000 (500) [increase in a/r]$54,500 COGS(35,000)(2,500) [increase in inv.] +3,500 [increase in a/p] (34,000) Rent(2,000)(1,000) [increase in pp rent](3,000) Interest(2,000)(500) [decrease in premium](2,500) Misc.(9,000)(3,000) [decrease in other pay](12,000) Depreciation(5,000)[no cash effect]0 Amortization(1,000)[no cash effect]0 Gain1,000 [no cash effect]0 Net income$ 2,000 Net cash from operations$ 3,000

21. Review Problem Investing Cash Flows Investing ActivitiesAdjustments/Investing ExplanationsCash Flows

22. Review Problem Investing Cash Flows Investing ActivitiesAdjustments/Investing ExplanationsCash Flows Sale of machineryCash proceeds$ 3,000

23. Review Problem Investing Cash Flows Investing ActivitiesAdjustments/Investing ExplanationsCash Flows Sale of machineryCash proceeds$ 3,000 Purchase of machineryCash purchases(10,000) Net cash provided (used) by investing activities$ (7,000)

24. Review Problem Financing Cash Flows Financing ActivitiesAdjustments/Financing ExplanationsCash Flows

25. Review Problem Financing Cash Flows Financing ActivitiesAdjustments/Financing ExplanationsCash Flows Issue of common stock$ 6,000

26. Review Problem Financing Cash Flows Financing ActivitiesAdjustments/Financing ExplanationsCash Flows Issue of common stock$ 6,000 Cash dividends(1,500) Net cash provided (used) by financing activities$ (4,500)

27. Review Problem Summary Statement of Cash Flows XYZ Enterprises Statement of Cash Flows For the Year Ended December 31, 2003

28. Review Problem Summary Statement of Cash Flows Cash provided (used) by operating activities$ 3,000 XYZ Enterprises Statement of Cash Flows For the Year Ended December 31, 2003

29. Review Problem Summary Statement of Cash Flows Cash provided (used) by operating activities$ 3,000 Cash provided (used) by investing activities(7,000) XYZ Enterprises Statement of Cash Flows For the Year Ended December 31, 2003

30. Review Problem Summary Statement of Cash Flows Cash provided (used) by operating activities$ 3,000 Cash provided (used) by investing activities(7,000) Cash provided (used) by financing activities 4,500 XYZ Enterprises Statement of Cash Flows For the Year Ended December 31, 2003

31. Review Problem Summary Statement of Cash Flows Cash provided (used) by operating activities$ 3,000 Cash provided (used) by investing activities(7,000) Cash provided (used) by financing activities4,500 Net increase (decrease) in cash balance$ 500 Beginning cash balance2,500 Ending cash balance$ 3,000 XYZ Enterprises Statement of Cash Flows For the Year Ended December 31, 2003