1. Chapter 41 Cash, Short-term Investments and Accounts Receivable Chapter 4

2. Chapter 10 Statement of Cash Flows

3. Chapter 103 Chapter 10 Learning Objectives Identify and distinguish among operating, investing, and financing activities. Prepare a statement of cash flows using the indirect method. Prepare a statement of cash flows using the direct method. Identify the principal users of the statement of cash flows for financial decision makers. Compute an interpret cash flows ratios, cash flow per share, and free cash flows.

4. Chapter 104 Three Types of Cash Flows OPERATING INVESTING FINANCING

5. Chapter 105 The Statement of Cash Flows

6. Chapter 106 Summary of Transaction Classifications for the SCF

7. Chapter 107 Summary of Transaction Classifications for the SCF

8. Chapter 108 Summary of Transaction Classifications for the SCF

9. Chapter 109 Gilbert Company purchases $100,000 face value 10% bonds from Garbo Company for $100,000 cash. This will appear on Gilbert’s statement of cash flows as a a. cash inflow from operating activities. b. cash inflow from investing activities. c. cash outflow from investing activities. d. cash outflow from financing activities.

10. Chapter 1010 Gilbert Company purchases $100,000 face value 10% bonds from Garbo Company for $100,000 cash. This will appear on Gilbert’s statement of cash flows as a a. cash inflow from operating activities. b. cash inflow from investing activities. c. cash outflow from investing activities. d. cash outflow from financing activities.

11. Chapter 1011 Browning Company issued 2,000 shares of its $5 par value common stock for $6 cash per share. This will appear on Browning’s statement of cash flows as a a. cash inflow from operating activities. b. cash inflow from financing activities. c. cash outflow from investing activities. d. cash outflow from financing activities.

12. Chapter 1012 Browning Company issued 2,000 shares of its $5 par value common stock for $6 cash per share. This will appear on Browning’s statement of cash flows as a a. cash inflow from operating activities. b. cash inflow from financing activities. c. cash outflow from investing activities. d. cash outflow from financing activities.

13. Chapter 1013 Browning Company borrowed $50,000 by issuing a long-term note payable. This will appear on Browning’s statement of cash flows as a a. cash inflow from operating activities. b. cash outflow from financing activities. c. cash outflow from investing activities. d. cash inflow from financing activities.

14. Chapter 1014 Browning Company borrowed $50,000 by issuing a long-term note payable. This will appear on Browning’s statement of cash flows as a a. cash inflow from operating activities. b. cash outflow from financing activities. c. cash outflow from investing activities. d. cash inflow from financing activities.

15. Chapter 1015 Direct Method: --operating section lists specific cash inflows and outflows from operating activities Indirect Method: --the net cash flow from operating activities is determined by making certain adjustments to net income Methods for Reporting Cash Flows from Operations (More informative) (Reconciliation required by GAAP)

16. Chapter 1016 Cash flows from operating activities: Receipts from customers$575,043 Payments to suppliers (424,607) Payments to employees(108,646) Payments for insurance(2,428) Receipt of interest on bank savings3,454 Payments of interest on capital leases(7,273) Payments of income taxes (15,230) Net cash provided by operating activities$20,313 Direct Method Example

17. Chapter 1017 Cash flows from operating activities: Net Income$61,386 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 29,738 Loss on sale of equipment460 Increase in Accounts Receivable(24,957) Increase in Inventory(12,684) Decrease in Prepaid Insurance2,575 Decrease in Accounts Payable(38,405) Increase in Income Taxes Payable 2,200 Net cash provided by operating activities $20,313 Indirect Method Example

18. Chapter 1018 Indirect Method – Start With Net Income

19. Chapter 1019 On a statement of cash flows prepared using the indirect method, depreciation expense is a. added under the operating activities. b. deducted under the financing activities. c. ignored. d. added under the investing activities.

20. Chapter 1020 On a statement of cash flows prepared using the indirect method, depreciation expense is a. added under the operating activities. b. deducted under the financing activities. c. ignored. d. added under the investing activities.

21. Chapter 1021 On a statement of cash flows prepared using the indirect method, a loss on the sale of equipment is a. deducted under the operating activities. b. deducted under the financing activities. c. ignored. d. added under the operating activities.

22. Chapter 1022 On a statement of cash flows prepared using the indirect method, a loss on the sale of equipment is a. deducted under the operating activities. b. deducted under the financing activities. c. ignored. d. added under the operating activities.

23. Chapter 1023 On a statement of cash flows prepared using the indirect method, a decrease in accounts receivable is a. deducted under the investing activities. b. deducted under the financing activities. c. added under the operating activities. d. added under the investing activities.

24. Chapter 1024 On a statement of cash flows prepared using the indirect method, a decrease in accounts receivable is a. deducted under the investing activities. b. deducted under the financing activities. c. added under the operating activities. d. added under the investing activities.

25. Chapter 1025 Direct Method Convert credit sales on the income statement to cash collected on account. Convert cost of goods sold on the income statement to cash paid for inventory. Convert operating expenses reported on the income statement to cash paid for operating expenses. Convert interest expense on the income statement to cash paid for interest. Convert income tax expense on the income statement to cash paid for income tax.

26. Chapter 1026 Converting Credit Sales into Cash Collected Assume beginning accounts receivable is $0, credit sales are $600,000, and ending accounts receivable is $24,957. Solve for cash collected on account.

27. Chapter 1027 Converting Cost of Goods Sold into Cash Paid for Inventory Assume beginning inventory is $17,954, cost of goods sold is $398,156, and ending inventory is $30,638. Solve for purchases of inventory.

28. Chapter 1028 Converting Cost of Goods Sold into Cash Paid for Inventory Continued Assume beginning accounts payable is $52,100, purchases are $410,840, and ending accounts payable is $13,695. Solve for cash payments to suppliers.

29. Chapter 1029 Converting Income Tax Expense into Cash Paid for Taxes Assume beginning taxes payable is $3,000, income tax expense is $24,150,and ending taxes payable is $800. Solve for cash payments for taxes.

30. Chapter 1030 Converting Insurance Expense into Cash Paid for Prepaid Insurance Assume beginning prepaid insurance is $5,000, insurance expense is $5,210, and ending prepaid insurance is $2,425. Solve for cash payments for taxes.

31. Chapter 1031 Converting Insurance Expense into Cash Paid for Prepaid Insurance Assume beginning prepaid insurance is $5,000, insurance expense is $5,210, and ending prepaid insurance is $2,425. Solve for cash payments for taxes.

32. Chapter 1032 Callison Company reports a beginning balance in accounts receivable of $2,500, credit sales of $55,000, and an ending balance in accounts receivable of $700. Cash collected on account amounted to a. $57,500. b. $55,700. c. $56,800. d. $52,500.

33. Chapter 1033 Callison Company reports a beginning balance in accounts receivable of $2,500, credit sales of $55,000, and an ending balance in accounts receivable of $700. Cash collected on account amounted to a. $57,500. b. $55,700. c. $56,800. d. $52,500.

34. Chapter 1034 Callison Company reports a beginning balance in prepaid insurance of $5,000, insurance expense on the income statement of $18,000, and an ending balance in prepaid insurance of $5,200. Cash paid for insurance during the current period amounted to a. $17,800. b. $18,000. c. $18,200. d. $18,400.

35. Chapter 1035 Callison Company reports a beginning balance in prepaid insurance of $5,000, insurance expense on the income statement of $18,000, and an ending balance in prepaid insurance of $5,200. Cash paid for insurance during the current period amounted to a. $17,800. b. $18,000. c. $18,200. d. $18,400.

36. Chapter 1036 Callison Company reports cost of goods sold on the income statement of $59,000. Beginning and ending accounts payable balances are $10,000 and $11,500, respectively. Beginning and ending merchandise inventory balances are $22,500 and $24,000, respectively. Compute cash paid for merchandise inventory. a. $46,500. b. $59,000. c. $60,500. d. $57,500.

37. Chapter 1037 Callison Company reports cost of goods sold on the income statement of $59,000. Beginning and ending accounts payable balances are $10,000 and $11,500, respectively. Beginning and ending merchandise inventory balances are $22,500 and $24,000, respectively. Compute cash paid for merchandise inventory. a. $46,500. b. $59,000. c. $60,500. d. $57,500.

38. Chapter 1038 Net Cash Flow from Operating Activities - Preferred Stock Dividends Weighted Average Number of Shares of Common Stock Outstanding Cash Flow Per Share

39. Chapter 1039 FCF = Cash provided by operating activities – Capital investments for PP&E Free Cash Flow

40. Chapter 1040 Heedy Company reports net income of $15,000. Depreciation expense is $3,000, accounts receivable decreased $2,500, inventory increased $3,500, and accounts payable increased $2,300. Compute the cash flow from operating activities.

41. Chapter 1041 Cash flows from operating activities Net income$15,000 Adjustment to reconcile net income to net cash flow provided by operating activities: Depreciation expense 3,000 Increase in inventory (3,500) Decrease in accounts receivable 2,500 Increase in accounts payable 2,300 Net cash provided by operating activities$19,300

42. Chapter 1042 THE END!