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Unformatted text preview: E x t e n d Y o u r K n o w l e d g e 1 9 - 2 : U s i n g a S p r e a d s h e e t t o P r e p a r e t h e C a s h F l o w S t a t e m e n t We calculate net cash inflows (outflows) from operating activities under the indi- rect method by using balance sheets at the beginning and end of the period, the current period’s income statement, and information about selected transactions. Exhibit 19.6 shows the income statement and balance sheet information for Genesis Corp. Based on this information, Exhibit 19A.1 presented the indirect method of reconciling net income to net cash inflows from operating activities. This supplement explains how we can use a spreadsheet (work sheet) analysis to prepare the cash flow statement using the indirect method. P r e p a r i n g t h e I n d i r e c t M e t h o d S p r e a d s h e e t A spreadsheet, also called a working paper, can help us organize the information needed to prepare a cash flow statement. A spreadsheet also makes it easier to check the accuracy of our work. To illustrate how we use this spreadsheet, we return to the comparative bal- ance sheets and income statement shown in Exhibit 19.6. Information needed for the spreadsheet in preparing the cash flow statement is listed below along with identifying letters: Exhibit CFS 19S.1 shows the indirect method spreadsheet for Genesis Corp. Both beginning and ending balance sheets are recorded on the spreadsheet. We enter information in the Analysis of Changes columns for the cash flows from operating, investing, and financing activities. We also include information about non-cash investing and financing activities near the bottom. The spreadsheet does not reconstruct the income statement. Instead, net income is entered as the first item used in calculating the amount of cash flows from operating activities. LO Illustrate use of a spreadsheet in preparing a cash flow statement. a. Net income is $38,000. b. Accounts receivable increases by $20,000. c. Merchandise inventory increases by $14,000. d. Prepaid expenses increases by $2,000. e. Accounts payable decreases by $5,000. f. Interest payable decreases by $1,000. g. Income taxes payable increases by $10,000. h. Amortization expense is $24,000. i. Capital assets costing $30,000 with accumulated amortization of $12,000 are sold for $12,000 cash. Loss on sale of assets is $6,000. j. Bonds with a book value of $34,000 are retired with a cash payment of $18,000. Gain on retirement of bonds is $16,000. k. Capital assets costing $70,000 are purchased with a cash payment of $10,000 and an issuance of bonds payable for $60,000. l. Issued 3,000 common shares for $15,000. m. Paid cash dividends of $14,000. EYK19-2:2 Extend Your Knowledge 19-2: Prepare the Cash Flow Statement Genesis Corp....
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