Fall 2010_Section Problem Set 11 (Chap 13)

# Fall 2010_Section Problem Set 11 (Chap 13) - AEM 2210...

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AEM 2210 Section Problem Set 11 Covering Material from Chapter 13 Name: Section: Material Review Statement of Cash Flows (Chapter 13) o Three kinds of activities Operating – changes in current assets and current liabilities Sales of goods/services Interest received on loans Dividends and interest received from investments Purchases of inventory Wages, salaries, benefits Investing – changes in non-current assets Purchases/Sale of investments Financing – changes in non-current liabilities and stockholders’ equity Stock/bond issuances Dividends paid Loan principals borrowed/repaid o Direct Method 1. Add all cash inflows 2. Subtract all cash outflows 3. Net cash = Cash inflows – Cash outflows o Indirect Method 1. Start with Net Income 2. Subtract all non-cash activity (i.e., increase in accounts receivable) 3. Net cash = Net income – non-cash activity o How to determine change in an account: 1. Add the inflows to the account 2. Subtract the outflows from the account 3. Determine the net change Example for accounts receivable: Add: New credit sales (increase accounts receivable) Less: Cash receipts (decrease accounts receivable)

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Net Change in Accounts Receivable
Jack’s Step-by-Step Guide to Cash Flow Statements 1) Line up comparative Balance Sheets by account. 2) Fine the difference from one year to next, by account. 3) Label each line… Operating, Investing or Financing, and whether they are “+to Cash” or “- to Cash”. 4) Go to the Income Statement… Find Net Income, Depreciation (or Amortization (type) Expenses), label these O for Operating. 5) Analyze, with “T” accounts, accounts with multiple reportable transactions… like PPE, Investments, Bonds and related accounts, Retained Earnings, etc. This allows you to pull out the transactions that need to be reported separately on the CFS. 6) Set up the “framework” for the CFS. 7) Drop in your Beginning and Ending Cash numbers first… you know what they are, and that way you have the change in Cash number to work toward. 8) Drop in the numbers (the differences on the Comparative BS,

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## This note was uploaded on 11/02/2011 for the course AEM 2210 taught by Professor Little,j. during the Spring '07 term at Cornell.

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Fall 2010_Section Problem Set 11 (Chap 13) - AEM 2210...

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