Lecture11_spring_2009

Lecture11_spring_2009 - Lecture 11 Spring 2009 Accounts...

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1 Lecture 11 Spring 2009 Accounts Receivables
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2 Quick recap from last class… Sales discounts and allowances Bad Debt expense Direct write-off Allowance method •Percentage of sales •Aging of accounts receivable
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3 Quick recap of the Operating Section of the  Statement of Cash Flows…
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4 Methods of Calculation •  Direct Method :  analyze all transactions that affect the cash account;        then group the transactions into common activities and report how these  activities affected cash. Indirect Method :  basically use the direct method for the investing and  financing sections, but for the operating section, reconcile net income to  cash flow from operations by accounting for non-cash and/or non- operating items embedded in accounting net income.
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5 Statement of Cash Flows: Cash Flows from Operations Cash Flows from Operations include all cash flows in and out related to  Normal operations of the core business This category is more complicated because we typically begin with Net Income  and (using the Indirect Method) back into Cash Flows from Operations We add back expenses that were taken to net income but that did not  reduce our cash balance (like depreciation) We subtract increases in non-cash assets (inventories, receivables, etc.) We add decreases  in non-cash assets  (inventories, receivables, etc.) We subtract decreases in payables and other related liabilities We subtract gains on sales of assets We add increases  in payables and other related liabilities We add back losses on sales of assets Where to the cash  proceeds related to a  gain or loss appear?
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6 Timberland Questions 1. As of the end of 2005, how much do the customers owe Timberland for goods and services which Timberland has already delivered and for which it has recognized revenue? 2. How much greater or less would Timberland’s 2005 net income before tax have been if it had always accounted for its bad debts using the Direct Write-off Method rather than the Allowance Method? 3. What was the total amount of cash collected by Timberland during 2005 from 2005 and prior years’ sales? Think about the assumptions which you have to make in order to come up with this estimate. 4. Refer to the Operating Activities Section of the Consolidated Statement of Cash Flows and, in particular, the adjustment for Customer receivables. Does the 2005 adjustment indicate that Accounts Receivable increased or decreased?
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7 CONSOLIDATED BALANCE SHEETS As of December 31, 2005 and 2004 2005 2004 share and per share data) ASSETS Current assets
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Lecture11_spring_2009 - Lecture 11 Spring 2009 Accounts...

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