Ch05 - CHAPTER 5 THE CASH FLOW STATEMENT FULFILLMENT OF...

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CHAPTER 5 THE CASH FLOW STATEMENT FULFILLMENT OF LEARNING OBJECTIVES Learning Objective Review Question Discussion Question Exercise Problem 1.. Indicate the purpose of the cash flow statement. 1 1,2 2. State the components of the cash flow statement. 2-4 3 1,2 3. Explain the changes in cash in terms of operating, investing, and financing activities. 5-7 10-12 4. Reconcile revenues with cash received from revenue activities and expenses with cash expenditures. 8-11 4 3-9 5. Employ the T-account method to determine cash flow from operating, investing, and financing activities. 12-16 6. Use the worksheet method to measure cash flow from operating, investing, and financing activities. 17 7. Prepare a statement of cash flows using either the indirect or direct method for calculating operating cash flows. 1-8
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Ketz--Cash Flow Statement Page 5-2 ATTRIBUTES OF EXERCISES AND PROBLEMS Exercise/ Problem Description Difficulty Level Estimate Time (minutes) EXERCISES 1 Identify the type of cash flow. Simple 10-15 2 Compute cash flow from operations. Medium 15-20 3 Relation between interest revenue and cash interest received. Medium 15-25 4 Relation between sales and cash received from customers. Medium 15-25 5 Relation between rent revenue and cash received from rentals. Medium 15-25 6 Relation between income tax expense and cash paid for income taxes. Medium 15-25 7 Relation between insurance expense and cash paid for insurance. Medium 15-25 8 Relation between cost of goods sold and cash paid to suppliers. Medium 15-25 9 Relation between cost of goods sold and cash paid to suppliers. Medium 20-30 10 Compute cash from investing activities. Medium 15-20 11 Impact of gains and losses on the income statement and cash flow statement. Medium 15-20 12 Compute cash from financing activities Medium 15-20 PROBLEMS 1 Prepare the cash flow statement. Medium 20-25 2 Prepare the cash flow statement. Medium 20-25 3 Prepare the cash flow statement. Medium 30-45 4 Prepare the cash flow statement. Medium 30-45 5 Prepare the cash flow statement. Difficult 40-60 6 Prepare the cash flow statement. Difficult 40-60 7 Prepare the cash flow statement. Difficult 45-75 Prepare the cash flow statement. Difficult 60-120
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Ketz--Cash Flow Statement Page 5-3 ANSWERS TO REVIEW QUESTIONS 1. One purpose of the cash flow statement is to help investors and creditors to understand the liquidity and the solvency of the firm, the abilities to generate cash and pay off debts. A second purpose is to assist in evaluating a firm's quality of earnings, the informativeness of the net income number in making investment decisions. 2. A cash flow is any transaction that increases or decreases the cash of the entity. If the cash is received by the firm, it is a cash inflow. If the cash is disbursed by the company, it is a cash outflow. 3. The cash flow statement is a financial statement that explains the change in cash as a
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Ch05 - CHAPTER 5 THE CASH FLOW STATEMENT FULFILLMENT OF...

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