Chpt 12 - Cash Flow Continued

Chpt 12 - Cash Flow Continued - SOLID FOOTING 181 Chapter...

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SOLID FOOTING 181 Chapter 12 Statement of Cash Flows Continued In the previous chapter, you were introduced to the Statement of Cash Flows. In that chapter, you developed an understanding of the Statement of Cash Flows and you learned how to prepare the Statement of Cash Flows using a Cash Flow Worksheet. In this chapter, you will be working with CCI 's next two months—August and September. ADDITIONAL OPERATING ACTIVITIES – CCI 's AUGUST TRANSACTIONS CCI ’s month of August will continue to use the Excel workbook that you used in the previous chapter entitled “4-Connie’s Consulting.xls”. If that workbook is not open on your computer then do the following: B Open your Excel application. ± Click the Open icon and navigate to the “Solid Footing 5e” folder. B Open the workbook “4-Connie’s Consulting.xls”. B Enable Macros. To select the month that you will be using: ± Click the August tab You should see Screen 12 A in the upper left corner of the screen. In CCI 's previous month of July, all of the Operating Activity transactions resulted from cash inflows and cash outflows and involved either a revenue or an expense account. Because of this, Cash Flows from Operating Activities and Net Income were equal after July's five Operating Activity transactions. Only after making July's depreciation adjusting entry, did Cash Flows from Operating Activities and Net Income become different amounts. In the month of August, there will be a total of nine transactions/adjusting entries—and all nine will be Operating Activities. What will make August’s Statement of Cash Flows a little more difficult to prepare is that six of the nine transactions/adjusting entries will have a different effect on the amount of Cash from Operating Activities than on the amount of Net Income. As you will see, the Cash Flow Worksheet will enable you to easily handle this increased level of complexity.
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182 SOLID FOOTING Chapter 12 – Statement of Cash Flows Continued August 1 – Buy Supplies On August 1, CCI purchases $2,500 of supplies. ± Click the Buy Supplies button. The quantity of supplies purchased will last for two or more months; thus CCI records the purchase as an asset in the Supplies account. Observe the following about this transaction: Z Cash is decreased by $2,500 – a cash outflow. Z Supplies is increased by $2,500 – Supplies is a current asset . Z Supplies Expense is not changed – thus Net Income will not be changed . Z The effect on Cash and the effect on Net Income are not the same. Z This transaction is an Operating Activity. August 1 – Pay the Office Rent for August On August 1, CCI pays $2,000 to rent office space for the month of August. ± Click the
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Chpt 12 - Cash Flow Continued - SOLID FOOTING 181 Chapter...

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