fin-acctg7-sm-ch12

fin-acctg7-sm-ch12 - Chapter 12 The Statement of Cash Flows...

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Unformatted text preview: Chapter 12 The Statement of Cash Flows Short Exercises (10 min.) S 12-1 The statement of cash flows helps investors and creditors: a. Predict future cash flows by reporting past cash receipts and payments, which are reasonably good predictors of future cash receipts and payments. b. Evaluate management decisions by reporting on how managers got cash and how they used cash to run the business. Chapter 12 The Statement of Cash Flows 235 (5-10 min.) S 12-2 4 things that could cause operating cash flows to be negative (under the indirect method) are: 1. Net loss 2. A large gain on the sale of assets 3. Increases in current assets other than cash 4. Decreases in current liabilities Students need to identify only 3 items. (5-10 min.) S 12-3 Cash flows from operating activities: Net income……………………………………………….. $80,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation…………………………………………... 9,000 Gain on sale of land…………………………………. (4,000) Increase in accounts receivable, inventory, and prepaid expenses ($78,000 $65,000)…... − (13,000) Decrease in current liabilities ($42,000 $40,000). − (2,000 ) Net cash provided by operating activities:…... $70,000 Financial Accounting 7/e Solutions Manual 236 (10 min.) S 12-4 O+ a. Loss on sale of land O+ h. Increase in accounts O+ b. Depreciation expense payable O − c. Increase in inventory O+ i. Net income O+ d. Decrease in prepaid F j. Payment of dividends expense O − k. Decrease in accrued O+ e. Decrease in accounts liabilities receivable F l. Issuance of common I f. Purchase of stock equipment O − m. Gain on sale of N g. Collection of cash building from customers N n. Retained earnings (10 min.) S 12-5 Edwards Corporation Statement of Cash Flows (partial) Year ended June 30, 20X8 Cash flows from operating activities: Net income……………………………………….. $ 81,000* Adjustments to reconcile net income to net cash provided by operating activities: Depreciation…………………………………... $ 8,000 Increase in current assets other than cash…………………………………………. (30,000) Decrease in current liabilities……………… (5,000 ) (27,000 ) Net cash provided by operating activities….. $ 54,000 _____ *$224,000 $100,000 $35,000 $8,000 = $81,000 − − − Chapter 12 The Statement of Cash Flows 237 (15 min.) S 12-6 Edwards Corporation Statement of Cash Flows Year ended June 30, 20X8 Cash flows from operating activities: Net income……………………………………….. $ 81,000* Adjustments to reconcile net income to net cash provided by operating activities: Depreciation…………………………………... $ 8,000 Increase in current assets other than cash…………………………………………. (30,000) Decrease in current liabilities……………… (5,000 ) (27,000 ) Net cash provided by operating activities…..Net cash provided by operating activities…....
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This note was uploaded on 09/07/2008 for the course ACCT 212 taught by Professor Hayes during the Summer '08 term at DeVry Decatur.

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fin-acctg7-sm-ch12 - Chapter 12 The Statement of Cash Flows...

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