Intermed Acc 1 chapter3

1. Chapter 3
Balance Sheet and Statement of Cash
Flows
• Identify the uses and contents of the statement of financial position.
• Prepare a classified financial position statement.
• Explain the purpose and content of the statement of cash flows.
• Prepare the statement of cash flows.
Learning Objectives :-

2. Content of the Statement of Cash Flow:
Cash Receipts and Cash Payments from:
-1-
Operating
activities
-2-
Investing
activities
-3-
Financing
activities

3. • Cash Receipts Cash Inflows to be added
• Cash Payments Cash Outflows to be deducted

4. Cash Inflows and Outflows:
1. Operating activities
Cash Inflows Cash Outflows
Add Deduct
• Cash sales and services Cash purchases
• Depreciation expense - - - - - - - - - - - - - - -
• Amortization of intangibles - - - - - - - - - - - - - - -
• Loss on sale of plant assets Gain on sale of plant assets
• Decrease in receivables Increase in receivables
• Decrease in inventory Increase in inventory
• Increase in accounts payable Decrease in accounts payable

5. Cash Inflows and Outflows:
2. Investing activities
Cash Inflows Cash Outflows
Add Deduct
• Sale of plant assets Purchase of plant assets
• Sale of shares of other entities Purchase of shares of other entities
• Collection of loans to other Loans to other entities
entities

6. Cash Inflows and Outflows:
3. Financing activities
Cash Inflows Cash Outflows
Add Deduct
• Issuance of ordinary shares Purchase of treasury shares
• Issuance of bonds Redemption of bonds
• - - - - - - - - - - - - - - - - Payment of cash dividends

7. Ex1: Planet Co. has provided the following information for 2022 :
1. Treasury shares were purchased at a cost of 13200.
2. Cash dividends of 36000 were declared and paid.
3. A long-term investment in shares was purchased for 19200.
4. Current assets other than cash increased by 34800. Current liabilities
increased by 15600.
5. Depreciation expense was 4800 on buildings and 10800 on equipment.
6. Net income was 66,000.
7. Bonds payable of 60,000 were issued.
8. An addition to the building was completed at a cost of 32400.
9. Patent amortization was 3000.
10. Equipment was sold for 12000 (cost 24000, accumulated depreciation 9600).

8. • Required:
1. Calculate: - Net cash flows from operating activities
- Net cash flows from investing activities Students work
- Net cash flows from financing activity
- will it result in net increase or decrease
in cash….for how much??
2. Prepare a statement of cash flows for 2022 given that cash at the year
beginning was 16000.

10. EX 2: Presented below is the comparative statement of financial position
for Planet Co.:
December 31
Assets: 2022 2021
Cash 63000 22000
Accounts receivable 82000 66000
inventory 180,000 189000
Land 71000 110,000
Equipment 270,000 200,000
Accumulated depreciation- equipment (69000) (42000)
Total 597000 545000
Liabilities and equity:
Accounts payable 34000 47000
Bonds payable 150,000 200,000
Share capital- ordinary 214000 164000
Retained earnings 199000 134000
Total 597000 545000

11. • Additional information:
1. Net income for 2022 was 105000.
2. Cash dividends of 40,000 were declared and paid.
3. Bonds payable for 50,000 were retired through issuance of ordinary
shares.
Required: Prepare a statement of cash flows for 2022 for Planet Co.
Note: with a comparative balance sheet ……..get the change.
Ok….let’s do it !!