Chap013

Chap013 - Chapter13 HowWellAmIDoing? StatementofCashFlows...

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PowerPoint Authors: Jon A. Booker, Ph.D., CPA, CIA Charles W. Caldwell, D.B.A., CMA Susan Coomer Galbreath, Ph.D., CPA Chapter 13 “How Well Am I Doing?”  Statement of Cash Flows
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Purpose of the Statement of Cash Flows Are cash flows sufficient to support ongoing operations? Can we meet our obligations to creditors? Can we pay dividends? Why is there a difference between net income and net cash flow? Will the company have to borrow money to make needed investments? 13-2
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Learning Objective 1 Classify changes in noncash balance sheet accounts as sources or uses of cash. 13-3
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Definition of Cash The term cash on the statement of cash flows refers broadly to both currency and cash equivalents. Cash Treasury Bills Money Market Funds Commercial Paper Currency and Bank Accounts 13-4
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Net Cash Flows for a Period 1. Net Income 5. Dividends Paid to Stockholders 2. Changes in Noncash Assets 3. Changes in Liabilities 4. Changes in Capital Stock Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts 13-5
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Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts 13-6
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Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts Example: Inventory is purchased on credit from a supplier. It is implied that cash was used to acquire the inventory. Increases in noncash asset noncash asset accounts imply uses uses of cash. 13-7
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Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts It is implied that an increase in a payable has the effect of increasing cash available for other uses. Increases in liability liability accounts imply sources sources of cash. Example: Inventory is purchased on credit from a supplier. 13-8
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Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts Decreases in noncash assets noncash assets accounts imply sources sources of cash. Example: Accounts receivable decreases when a company pays its bill. The company’s cash increases accordingly. 13-9
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Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts Decreases in liability liability accounts imply uses uses of cash. The company’s cash balance decreases accordingly. Example: If a company makes a payment on a note payable. 13-10
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A Simplified Statement of Cash Flows Ed's Pizza Hut Comparative Balance Sheet Account Balances 3/31/2009 3/31/2008 Change DR (CR) DR (CR) Incr. (Decr.) Cash 71,000 $ 90,000 $ (19,000) $ Accounts Receivable 23,000 40,000 (17,000) Inventory 322,000 300,000 22,000 Land 68,000 100,000 (32,000) Equipment 112,000 84,000 28,000 Accumulated Depr. (45,000) (39,000) 6,000 Accounts Payable (38,000) (27,000) 11,000 Salaries Payable (9,000) (14,000) (5,000) Note Payable - Joe Doe - (50,000) (50,000) Common Stock (500,000) (450,000) 50,000 Retained Earnings (4,000) (34,000) (30,000) - $ - $ 13-11
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Additional Information: There was a net loss for the year of $27,000.
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Chap013 - Chapter13 HowWellAmIDoing? StatementofCashFlows...

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