Ch05(6th)Post - Chapter F5 Chapter F5 Reporting Cash Flows...

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Reporting Cash Reporting Cash Flows Flows Chapter Chapter F5 F5
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5 - 2 1. Explain information reported on a statement of cash flows using the direct format. 2. Explain information reported on a statement of cash flows using the indirect format. 3. Interpret cash flow information as a basis for analyzing financial performance. Objectives Objectives
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5 - 3 The Statement of Cash Flows The Statement of Cash Flows The statement of cash flows explains the changes in a company’s cash balance during the fiscal period. GAAP permits the statement to be presented in either of two formats: direct or indirect
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5 - 4 Cash Flow from Operating Activities Cash Received from Operating Activities Cash Paid for Operating Activities Net Cash from (for) Operating Activities = = The Direct Format The Direct Format Obj - 1
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5 - 5 Cash Flow from Investing Activities Cash Flow from Investing Activities Cash Received from Investing Activities Cash Paid for Investing Activities Net Cash from (for) Investing Activities = = The Direct Format The Direct Format Obj - 1
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5 - 6 Cash Flow from Financing Activities Cash Flow from Financing Activities Cash Received from Financing Activities Cash Paid for Financing Activities Net Cash from (for) Financing Activities = = The Direct Format The Direct Format Obj - 1
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5 - 7 The Direct Format The Direct Format Operating cash flows are the cash equivalent of the accrual results reported on the income statement. The direct format answers the question, “Where did cash come from and where did cash go?” Obj - 1
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5 - 8 Favorite Cookie Company Statement of Cash Flows For the Year Ended December 31, 2007 Operating Activities Receipts: Collections from customers $662,080 Payments: For inventory (471,590) To employees (70,800) For rent (24,000) For utilities (4,500) For supplies (15,990) For insurance (3,700) For advertising (6,500) For interest (4,150) For income tax (22,710 ) Net cash flow from operating activities 58,140 Continued Continued Exhibit 1 Exhibit 1 Obj - 1
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5 - 9 Carried forward $ 58,140 Investing Activities Payments for purchase of equipment (216,000) Receipts from sale of equipment 340 Net cash flow for investing activities (215,660 ) Financing Activities Receipts from sale of common stock 100,000 Payment of dividends (10,000) Receipts from borrowing 80,000 Repayment of debt (1,800 ) Net cash flow from financing activities 168,200 Net increase in cash 10,680 Cash balance, December 31, 2006 0 Cash balance, December 31, 2007 $ 10,680 Exhibit 1 Exhibit 1 Statement of Cash Flows, Direct Format Obj - 1
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5 - 10 Operating activities are transactions involving the acquisition or production of goods and services and the sale and distribution of these goods and services to customers.
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