China IV - A continuing case study CHINATRADE,INC. Part IV...

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A continuing case study… CHINA TRADE, INC. Learning Objectives ` l To understand what information the Statement of Cash Flows provides l To classify cash transactions in the appropriate Operating, Investing or Financing activity categories, and thereby prepare a Statement of Cash Flows under the "direct method". l To prepare the Cash Flows from Operating Activities section under the "indirect method", using increases and increases in balance sheet amounts. l To evaluate an organization's cash flows, using a rule-of-thumb measure. Requirements a. For each of the cash transactions under the "Transactions", tab, enter the cash amount in the Inflows or Outflows column of the Cash Flows Journal as appropriate (see "CashFlows" tab). Select the appropriate "classification code" from the code numbers on the Statement of Cash Flows. The first transaction has already been entered to serve as an example. If a transaction does not involve cash, leave that line blank. For answers to all the adjusting entries, click on the "Answer" tab. b. Note that the Statement of Cash Flows is prepared from your postings automatically. When you have completed all the cash postings, check the end-of-period balance to make sure it agrees with the Cash amount on the balance sheet at August 31 (see "Balance Sheet" tab.) c. In the tab called "Indirect" is a skeleton for the Operating Activities section of the Statement of Cash Flows as it would appear under the "indirect method." Fill in the amounts on the blank lines by referring to the income statement and balance sheet contained in the "Income in asset accounts become negative adjustments and are to be shown in brackets and subtracted from net income rather added. The opposite is true of liabilities. Note also that since all balance sheet accounts started with a zero balance at the beginning of this first month of operations, the amount of increase of each account is the same as the ending balance. Normally, it would be necessary to subtract the beginning balance from the ending balance to arrive at the amount of increase or decrease for the period. Part IV - Statement of Cash Flows
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When finished check your answer to the one contained in the "Answer" tab. d. Check to make sure the net cash flows from operating activities under the "indirect method" is the same as the net cash flows from operating activities under the "direct method". e. Essay Questions
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This note was uploaded on 03/28/2011 for the course ACC 501 taught by Professor Patriciam.casey during the Spring '07 term at National.

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China IV - A continuing case study CHINATRADE,INC. Part IV...

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