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					The Statement of Cash Flows

Electronic Presentations for Chapter 14

Key Points
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The structure and format of the statement of cash flows. Cash flows from operating, investing, and financing activities. How the statement of cash flows complements the other financial statements and how it can be used by those interested in the financial condition of a company. Important investing and financing transactions that do not appear on the statement of cash flows and how they are reported. Economic consequences associated with the statement of cash flows. Preparing a statement of cash flows from the information contained in two balance sheets, an income statement, and a statement of retained earnings.

General Description of the Statement of Cash Flows
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Cash provided (used) by operating activities
– Cash inflows and outflows associated with the acquisition and sale of the company’s inventories and services

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Cash provided (used) by investing activities
– Cash inflows and outflows associated with the purchase and sale of a company’s noncurrent assets

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Cash provided (used) by financing activities
– Cash inflows and outflows associated with a company’s two sources of outside capital: liabilities and contributed capital

Determining Cash Inflow from Sales
Sales (1) 32,000 Accounts Receivable

(1)

12,00 0 32,00 0 Bad Debt Expense

Allowance for Doubtful Accounts

(1) Sales on account.

Determining Cash Inflow from Sales
Sales (1) 32,000 Accounts Receivable

(1)

12,00 0 32,00 0 Bad Debt Expense

Allowance for Doubtful Accounts 1,000 (2) 1,100 (2)

1,100

(1) Sales on account.

(2) Estimated allowance

Determining Cash Inflow from Sales
Sales (1) 32,000 Accounts Receivable

(1)

12,00 0 32,00 0

(3)

800

Allowance for Doubtful Accounts 1,000 (2) 1,100 (3) 800 1,300

Bad Debts Expense (2) 1,100

(1) Sales on account. (3) Write-off of accounts receivable

(2) Estimated allowance

Determining Cash Inflow from Sales
Sales (1) 32,000 Accounts Receivable 12,00 (1) 0 (4) Cash inflow from 32,00 0 sales = $20,000 Allowance for Doubtful Accounts 1,000 (2) 1,100 (3) 800 1,300 (1) Sales on account (3) Write-off of accounts receivable (2) Estimated allowance (4) Collection on account 800 (3) (4) 20,000

Bad Debt Expense 23,20 0 (2) 1,100

Determining Cash Paid to Suppliers
Cost of Goods Sold (1) 11,000 Inventory 3,000

(1) 11,000

Accounts Payable 12,000

(1) Sales

Determining Cash Paid to Suppliers
Cost of Goods Sold (1) 11,000 (2) Inventory 3,000

(1) 11,000
12,00 0

Accounts Payable 12,000 (2) 12,000

(1) Sales

(2) Inventory purchase on account

Determining Cash Paid to Suppliers
Cost of Goods Sold (1) 11,000 (2) Inventory 3,000

(1) 11,000
12,00 0 4,000

Accounts Payable 12,000 (2) 12,000 (3) 15,00 0 9,000 (1) Sales (3) Payment on account. (2) Inventory purchase on account

(3) Cash paid to suppliers = $15,000

Determining Cash Inflow from Sale of Machinery
Loss on Sale of Machinery Machinery 8,000

Accumulated Depreciation 2,000 (1) 1,000

Depreciation Expense

(1) 1,000

(1) Depreciation

Determining Cash Inflow from Sale of Machinery
Loss on Sale of Machinery (2) 100 Machinery 8,000 (2) Cash inflow from machinery = $1,400 6,000 Accumulated Depreciation 2,000 (1) 1,000 (2) 500 2,500 (1) Depreciation (2) Sale of machinery for a loss (2) 2,000

Depreciation Expense (1) 1,000

Review Problem Operating Cash Flows
Income Statement Adjustments/ Explanations
(500) [increase in a/r]

Operating Cash Flows
$54,500

Sales

$55,000

Review Problem Operating Cash Flows
Income Statement Adjustments/ Explanations
(500) [increase in a/r] (2,500) [increase in inv.] +3,500 [increase in a/p]

Operating Cash Flows
$54,500 (34,000)

Sales COGS

$55,000 (35,000)

Review Problem Operating Cash Flows
Income Statement Adjustments/ Explanations Operating Cash Flows
Sales COGS Rent Interest Misc. Depreciation Amortization Gain $55,000 (35,000) (2,000) (2,000) (9,000) (5,000) (1,000) 1,000 (500) [increase in a/r] $54,500 (2,500) [increase in inv.] +3,500 [increase in a/p] (34,000) (1,000) [increase in pp rent] (3,000) (500) [decrease in premium] (2,500) (3,000) [decrease in other pay] (12,000) [no cash effect] 0 [no cash effect] 0 [no cash effect] 0

Review Problem Operating Cash Flows
Income Statement Adjustments/ Explanations Operating Cash Flows
$54,500 (34,000) (3,000) (2,500) (12,000) 0 0 0 $ 3,000 Sales COGS Rent Interest Misc. Depreciation Amortization Gain Net income $55,000 (35,000) (2,000) (2,000) (9,000) (5,000) (1,000) 1,000 $ 2,000 (500) [increase in a/r] (2,500) [increase in inv.] +3,500 [increase in a/p] (1,000) [increase in pp rent] (500) [decrease in premium] (3,000) [decrease in other pay] [no cash effect] [no cash effect] [no cash effect] Net cash from operations

Review Problem Investing Cash Flows
Investing Activities Adjustments/ Explanations
Cash proceeds

Investing Cash Flows
$ 3,000

Sale of machinery

Review Problem Investing Cash Flows
Investing Activities Adjustments/ Explanations
Cash proceeds Cash purchases

Investing Cash Flows
$ 3,000 (10,000) $ (7,000)

Sale of machinery Purchase of machinery

Net cash provided (used) by investing activities

Review Problem Financing Cash Flows
Financing Activities Adjustments/ Explanations Financing Cash Flows
Issue of common stock

$ 6,000

Review Problem Financing Cash Flows
Financing Activities Adjustments/ Explanations Financing Cash Flows
Issue of common stock Cash dividends Net cash provided (used) by financing activities

$ 6,000 (1,500) $ (4,500)

Review Problem Summary Statement of Cash Flows
XYZ Enterprises Statement of Cash Flows For the Year Ended December 31, 2000 Cash provided (used) by operating activities Cash provided (used) by investing activities Cash provided (used) by financing activities $ 3,000 (7,000) 4,500

Review Problem Summary Statement of Cash Flows
XYZ Enterprises Statement of Cash Flows For the Year Ended December 31, 2000 Cash provided (used) by operating activities Cash provided (used) by investing activities Cash provided (used) by financing activities Net increase (decrease) in cash balance Beginning cash balance Ending cash balance $ $ 3,000 (7,000) 4,500 500 2,500 $ 3,000


				
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