Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Hhtfa8e ch12 stud devry Accounting 212 FINANCIAL ACCOUNTING

461 views

Published on

devry Accounting 212 FINANCIAL ACCOUNTING ch12

Published in: Education
  • Be the first to comment

  • Be the first to like this

Hhtfa8e ch12 stud devry Accounting 212 FINANCIAL ACCOUNTING

  1. 1. Copyright ©2010 Pearson Education Inc. Publishing as Prentice Hall. 1
  2. 2. Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 2
  3. 3. The Statement of Cash FlowsChapter 12 Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 3
  4. 4. Identify the purposes of the statement of cashflows Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 4
  5. 5. Timing of the Financial Statements 12-31-10 For the year ended 12-31-11 12-31-11(a point in time) (a period of time) (a point in time) Income Balance Statement Sheet Balance Statement of Balance Sheet Stockholders Sheet ’ Equity Statement of Cash Flows Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 5
  6. 6. Purposes of Cash Flow Statements Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 6
  7. 7. Distinguish among operating, investing andfinancing cash flows Copyright ©2 010 Pearson Education Inc. Publishing as Prentice Hall. 7
  8. 8. Cash Flow Categories Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 8
  9. 9. Relationship to Balance SheetOperating Operatingcash flows Current assets Current liabilities cash flows Long-term liabilities FinancingInvesting Long-term assets cash flowscash flows Owners’ equity Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 9
  10. 10. Formats for Cash Flow Statement Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 10
  11. 11. Prepare a statement of cash flows by theindirect method Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 11
  12. 12. Exercise 12-16A A Sale of long-term investment B Issuance of long-term note payable to borrow cash C Increase in prepaid expenses D Payment of cash dividend E Loss on sale of equipment F Decrease in merchandise inventory G Acquisition of equipment by issuance of a note payable H Increase in accounts payable I Amortization of intangible assets J Net income Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 12
  13. 13. Exercise 12-16A K Payment of long-term debt L Accrual of salary expense M Cash sale of land N Purchase of long-term investment O Acquisition of building by cash payment P Purchase of treasury stock Q Issuance of common stock for cash R Decrease in accrued liabilities S Depreciation of equipment Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 13
  14. 14. Finding Needed Amounts:Operating Activities• From the income statement ▫ Net income ▫ Depreciation, depletion and amortization expense ▫ Gains and losses on sales of long-term asset• From the comparative balance sheets ▫ Increase or decrease in each current asset (other than cash) ▫ Increase or decrease in each current liability Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 14
  15. 15. Operating Activities Net Income Depreciation, Depletion & Amortization Gains on sales of Losses on sales of long-term assets long-term assetsIncreases Decreases Decreases Increasesin current in current in current in current assets liabilities assets liabilities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 15
  16. 16. Cash Flow Template: OperatingCash Flows From Operating ActivitiesNet incomeAdjustments to reconcile net income to net cash provided by operatingactivities: Depreciation/depletion/amortization expense Loss on sale of long-term assets Gain on sale of long-term assets Increases in current assets other than cash Decreases in current assets other than cash Increases in current liabilities Decreases in current liabilities= Net cash provided by operating activities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 16
  17. 17. Cash Flow Template: InvestingCash Flows from Investing Activities Sales of long-term assets Purchases of long-term assets Collections of notes receivable Loans to others = Net cash provided by (used for) investing activities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 17
  18. 18. Computing Purchases and Sales of PlantAssetsPlant Assets, NetBeginning + Acquisitions - Depreciation - Book value of = Endingbalance assets sold Balance Sale = Book value of + Gain - Loss proceeds assets sold Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 18
  19. 19. Plant Assets, NetBeginning balance DepreciationAcquisitions Book value of assets soldEnding balance Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 19
  20. 20. Computing Purchases and Sales ofInvestments Investments Beginning + Purchases - Book value of = Ending balance investments sold Balance Investments Beginning balance Book value of investments sold Purchases Ending balance Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 20
  21. 21. Loans and Collections Notes Receivable Beginning + New Loans - Collections = Ending balance made Balance Notes Receivable Beginning balance Collections New loans made Ending balance Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 21
  22. 22. Cash Flow Template: FinancingCash Flows from Financing Activities Issuance of stock Purchase of treasury stock Borrowing Payment of notes and bonds payable Payment of dividends Net cash provided by (used in) financing activities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 22
  23. 23. Computing Issuance and Paymentsof Long-Term Debt Long-Term Debt (Notes payable, Bonds payable) Beginning + Issuance of - Payment of debt = Ending balance new debt Balance Long-Term Debt Beginning balance Payments of debt Issuance of new debt Ending balance Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 23
  24. 24. Computing Issuance of Stock andPurchases of Treasury Stock Common Stock Beginning balance + Issuance of new stock = Ending BalanceTreasury StockBeginning balance + Purchase of treasury stock = Ending Balance Treasury Stock Common StockBeginning balance Beginning balancePurchase of Issuance of new stocktreasury stockEnding balance Ending balance Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 24
  25. 25. Computing Dividends Retained Earnings Beginning + Net income - Dividends = Ending balance declared Balance Retained Earnings Beginning balance Dividends declared Net income Ending balance Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 25
  26. 26. Noncash Investing and FinancingActivities Noncash investing and financing activities: Acquisition of building by issuing common stock $$$$ Acquisition of land by issuing note payable $$$$ Payment of long-term debt by issuing stock $$$$ Bonds converted into common stock $$$$ Stock dividends distributed $$$$ Total noncash investing and financing activities $$$$$ Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 26
  27. 27. Exercise 12-20A December 31, 2010 2009 Current assets: Cash Accounts receivable Inventory Prepaid expenses Current liabilities: Accounts payable Accrued liabilities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 27
  28. 28. Exercise 12-20A December 31, 2010 2009 Current assets: Cash $30,000 $10,800 Accounts receivable 42,000 59,000 Inventory 30,000 91,000 Prepaid expenses 9,400 8,700 Current liabilities: Accounts payable $38,000 $27,000 Accrued liabilities 18,000 99,000 Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 28
  29. 29. Exercise 12-20ACash Flows From Operating ActivitiesNet incomeAdjustments to reconcile net income to net cashprovided by operating activities:+ Depreciation expense+ Decrease in accounts receivable+ Decrease in inventory- Increase in prepaid expenses+ Increase in accounts payable- Decrease in accrued liabilities= Net cash provided by operating activities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 29
  30. 30. Exercise 12-20ACash Flows from Investing Activities+ Sales of land- Purchases of plant assets= Net cash used for investing activitiesCash Flows from Financing Activities+ Issuance of common stock- Payment of note payable- Payment of dividends= Net cash provided by financing activities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 30
  31. 31. Exercise 12-20ANet cash provided by operating activitiesCash Flows from Investing Activities+ Sales of land- Purchases of plant assets= Net cash used for investing activitiesCash Flows from Financing Activities+ Issuance of common stock- Payment of note payable- Payment of dividends= Net cash provided by financing activities Net increase in cash Cash balance, December 31, 2009 Cash balance, December 31, 2010 Copyright ©2010 Pearson Education Inc. Publishing as Prentice Hall. 31
  32. 32. Prepare a statement of cash flows by the directmethod Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 32
  33. 33. The Direct Method• Preferred by the Financial Accounting Standards Board• Very few companies use• Only affects operating activities Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 33
  34. 34. Operating Cash Flows: DirectMethod• Receipts: ▫ Collections from customers ▫ Interest and dividends• Payments ▫ To suppliers ▫ To employees ▫ For interest and income taxes Copyright ©2010 Pearson Education Inc. Publishing as Prentice Hall. 34
  35. 35. Computing Operating Cash Flows Income Statement Receipts Account Balance Sheet AccountFrom Customers Sales revenue + Decrease in Accounts Receivable - Increase in Accounts ReceivableOf interest Interest revenue + Decrease in Interest Receivable - Increase in Interest Receivable Copyright ©2010 Pearson Education Inc. Publishing as Prentice Hall. 35
  36. 36. Computing Operating Cash Flows Income StatementPayments Account Balance Sheet AccountTo suppliers Cost of + Increase in Inventory + Decrease in Accounts goods sold Payable - Decrease in Inventory - Increase in Accounts Payable Operating + Increase in Prepaids + Decrease in Accrued expenses Liabilities - Decrease in Prepaids - Increase in Accrued LiabilitiesTo Salary + Decrease in Salary Payableemployees expense - Increase in Salary Payable Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 36
  37. 37. Computing Operating Cash Flows Income StatementPayments Account Balance Sheet AccountFor interest Interest + Decrease in Interest Payable expense - Increase in Interest PayableFor income Income tax + Decrease in Income Tax Payabletaxes expense - Increase in Income Tax Payable Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 37
  38. 38. Free Cash Flow Free Cash Flow Net Cash Provided by Operating Activities Cash Payments Earmarked for Investments in Plant Assets Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 38
  39. 39. Copyright © 2010 Pearson Education Inc. Publishing as Prentice Hall. 39

×