Statement of cash flows

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Ch14 CF Excel

Debits make cash go DOWN in Cash Flow
Credits make cash go UP
Account category Normal Balance Operating Investing Financing
Current Asset Debit X
Current Asset-Contra Credit X
Non-current Asset Debit X
Non-current Asset-Contra Credit X
Current Liability Credit X
Current Liability-Contra Debit X
Non-Current Liability Credit X
Non-Current Liability-Contra Debit X
Equity Credit X
Equity-Contra Debit X
Income Statement Accounts: Revenue/Income Credit X
Income Statement Accounts: Expense/Losses Debit X
Other Expense / Loss on sale of Non-current assets Debit X
Other income /Gain on sale of Non-current assets Credit X
Accumulated Amortization [Amortization Expense] Credit X Add back to net income - Cash UP
Accumulated Depreciation [Depreciation Expense] Credit X Add back to net income - Cash UP
Contra's act opposite from that to which they are contra
Taxes are operating whether deferred tax assets or deferred tax liabilities whether current or non-current Dr./Cr,
#1 Repaid long term debt of : $ 600,000 Data Set #2 Purchase of PPE = $ 125,000 Data given Equity Example Effect
Sale of PPE:NBV = $12000, Cost $24000, sold $14000) Data Set Purchase of Intangibles = $ 95,000 Data given Cost $ 85,000 Dr/Cr Balance 2xx2 2xx1 Change on Cash Ref
Bought Treasury Stock $ 12,000 Data Set Sales of PPE = $ 43,000 Gain = $ 6,000 Data given AD $ 48,000 Common stock Par Value C $450,000 $320,000 $130,000 $130,000 W
Used Treasury Stock of $50,000 to buy PPE $ 50,000 Data Set Cost = $ 85,000 Data given BV $ 37,000 Additional Paid-in-Capital C $9,670,000 $7,200,000 $2,470,000 $2,470,000 X
Sold common stock of $ 125,000 Data Set New Debt = $ 470,000 Sale $ 43,000 Treasury Stock D ($1,054,000) $0 ($1,054,000) ($1,054,000) Y
Paid dividend of $ 23,000 Data Set No Dividends Retained Earnings C $3,200,000 $2,900,000 $300,000 $300,000 Z
Total Equity C $12,266,000 $10,420,000 $1,846,000 $1,846,000
Affect on Class Company, Inc.
Class Company, Inc. Category Cash Balance Sheet as of Cash up W Issued/Sold Common Stock 130000 shares $1 par for $20
Balance Sheet as of Increase Increase 12/31/2xx1 12/31/2xx2 Cash Cash up X Issued/Sold Common Stock 130000 shares $1 par for $20
Assets: 12/31/2xx1 12/31/2xx2 (Decrease) (Decrease) Assets: Increase Increase Cash Down Y Bought Back 62000 shares common stock for $17
Current Assets: $s $s Current Assets: $s $s (Decrease) (Decrease) Cash down for dividends Z Had NI of $700,000 and Issued Dividends of $400,000
Cash 150,000 316,000 166,000 (166,000) Cash 200,000 952,110 752,110 752,110
D Accounts Receivable 355,000 418,000 63,000 (63,000) D Accounts Receivable 385,100 438,000 52,900 (52,900)
D Prepaid Expenses 27,000 19,000 (8,000) 8,000 D Prepaid Expenses 33,000 29,000 (4,000) 4,000
D Other Current Assets 15,000 11,000 (4,000) 4,000 D Other Current Assets 22,000 7,000 (15,000) 15,000
Total Current Assets: 547,000 764,000 217,000 (217,000) Total Current Assets: 640,100 1,426,110
Plant Property & Equipment 954,000 1,127,000 173,000 (173,000) D Plant Property & Equipment 2,700,000 2,740,000 40,000 (40,000)
Cr. Accumulated Depreciation 332,000 445,000 113,000 113,000 P&L item Cr. Balance Accumulated Depreciation (600,000) (760,000) (160,000) 160,000 P&L item
Net Plant Property & Equipment 622,000 682,000 60,000 (60,000) Net Plant Property & Equipment 2,100,000 1,980,000
Other Non-Current Assets: Other Non-Current Assets:
D Intangibles 375,000 350,000 (25,000) 25,000 P&L item D Intangibles 500,000 480,000 (20,000) 20,000 P&L item
D Deferred Loan Placement Costs 25,000 25,000 0 0 P&L item D Deferred Loan Placement Costs 30,000 30,000 0 0 P&L item
D Other Non-Current assets 15,000 14,000 (1,000) 1,000 D Other Non-Current assets 41,000 37,000 (4,000) 4,000 givern as Oper.
Total Other Non-Current Assets 415,000 389,000 (26,000) 26,000 Total Other Non-Current Assets 571,000 547,000
Total Assets 1,584,000 1,835,000 251,000 (251,000) Total Assets 3,311,100 3,953,110
Liabilities: Liabilities:
Current Liabilities Current Portion of Long Term Debt 260,000 290,000 30,000 30,000
C Accounts Payable 129,000 139,000 10,000 10,000 C Accounts Payable 720,000 760,000 40,000 40,000
C Accrued Expenses 51,000 64,000 13,000 13,000 C Accrued Expenses 50,000 40,000 (10,000) (10,000)
C Current Portion of LT debt 31,000 63,000 32,000 32,000 C Other Current Liabilities 23,000 11,000 (12,000) (12,000)
C Other Current Liabilities 23,000 11,000 (12,000) (12,000) Total Current Liabilities 1,053,000 1,101,000
Total Current Liabilities 234,000 277,000 43,000 43,000
Non-Current Liabilities
Non-Current Liabilities C Long Term Debt 1,100,000 915,000 (185,000) (185,000)
C Long Term Debt 1,100,000 915,000 (185,000) (185,000) C Deferred Income Taxes 55,000 71,000 16,000 16,000
C Deferred Income Taxes 83,000 99,000 16,000 16,000 P&L item C Other Non-current Liabilities 3,000 5,000 2,000 2,000 P&L item
C Other Non-current Liabilities 14,000 12,000 (2,000) (2,000) Operating/given Total Non-Current Liabilities 1,158,000 991,000
C Total Non-Current Liabilities 1,197,000 1,026,000 (171,000) (171,000)
Total Liabilities 2,211,000 2,092,000
Total Liabilities 1,431,000 1,303,000 (128,000) (128,000)
Owners Equity
Owners Equity C Common Stock @ par = $0.01 100 110 10 10
C Common Stock @ par = $0.01 100 225 125 125 50,000 C Additional Paid-in Capital 700,000 805,000 105,000 105,000
C Additional Paid-in Capital 99,900 224,775 124,875 124,875 (12,000) C Retained Earnings 400,000 1,056,000 656,000 656,000
D Treasury Stock [dr. acct.] 65,000 27,000 (38,000) 38,000 38,000 Total Owners' Equity 1,100,100 1,861,110
Part of RE Dividends paid [before closing entries] dr.Acct. 0 23,000 23,000 (23,000)
After Retained Earnings 118,000 357,000 239,000 239,000 Before Total Liabilities and Owners Equity 3,311,100 3,953,110
closing JE Total Owners' Equity 153,000 532,000 349,000 379,000 Dividends
acct.
Total Liabilities and Owners Equity 1,584,000 1,835,000 221,000 251,000 closed @ YE 0 0
0 0 Note: in this example we have Intangibles - which is also a non-cash charge to income
like depreciation - so we add that back to net income just like deprecation:
Note: in this example we have Intngibles - which is also a non-cash charge to income
like depreciation - so we add that back to net income just like deprecation:
Class Company, Inc. Statement of Retained Earnings
Statement of Income Beginning RE 400,000
Class Company, Inc. Period Ending 12/31/2xx2 Net Income 656,000
Statement of Income $s $s Dividends 0
Period Ending 12/31/2xx2 Revenue 7,000,000 100.0% Ending RE 1,056,000
$s $s
Revenue 3,600,000 100.0% Statement of Retained Earnings Cost of Goods Sold 4,500,000 64.3%
Beginning RE 118,000
Cost of Goods Sold 2,113,000 58.7% Net Income 239,000 Gross Profit 2,500,000 35.7%
Dividends (23,000)
Gross Profit 1,487,000 41.3% Ending RE 334,000 Operating Expenses: 1,500,000 21.4%
Operating Income 1,000,000 14.3%
Operating Expenses: End RE Before Div. closing JE 357,000
Wage Expense 721,000 20.0% Dividends (23,000) Other Income/Gain 6,000 0.1%
Advertising & Marketing Expense 78,000 2.2% End RE after Close JE 334,000
Vehicle Expenses 22,000 0.6% Provision for Income Taxes 505,000 7.2%
Insurance and Other 48,000 1.3%
Depreciation 125,000 3.5% Operating Income 1,000,000 14.3%
Write-off of Goodwill 25,000 0.7% $24,000 COST 37000 NBV
Total Operating Expenses 1,019,000 28.3% $12,000 AD Other Income 6,000 0.1% Gain = 43000 sold
$12,000 NBV Taxes 350,000 5.0% 6000 Gain
Operating Income 468,000 13.0% $14,000 Sold for 85000 Cost
$2,000 Gain on IS Net Income 656,000 9.4% 48000 AD
Other Income ( 2,000 0.1% data from beginning belongs in
Investing Class Company, Inc.
Income Before Taxes 470,000 13.1% Statement of Cash Flows for Period Ending 12/31/2012
$s
Provision for Income Taxes 231,000 6.4% Cash Flows From Operating Activities: Amrtzn
Net Income 656,000 ∆ C - AD Beg $ 500,000
Net Income 239,000 6.6% Plus: Depreciation 208,000 $ 160,000 $ 48,000 Added $ 95,000
Plus: Amortization Expense 115,000 $ 20,000 $ 95,000 End $ (480,000)
Changes in Current Assets and Liabilities ∆ Purchase [data] Amrtzn $ 115,000
(Increase) Accounts Receivable (52,900)
Decrease Prepaid Expenses 4,000
Class Company, Inc. Decrease Other Current Assets 15,000
Statement of Cash Flows for Period Ending 12/31/2xx2 Increase Accounts Payable 40,000
Increase Accrued Expenses (10,000)
$s (Decrease) Other Current Liabilities (12,000)
Cash Flows From Operating Activities: Other Changes
Net Income 239,000 AD sold Less: Gain om Sale of PPE (6,000) Remove Gain or Loss-Sales of LT Assets
Plus: Depreciation Expense 125,000 113,000 12,000 125,000 Increase in Deferred Taxes 16,000 deferred tax Non-current are Operating
Plus: Amortization Expense 25,000 Change Expense Decrease in Non-current Liabilities 2,000 Given: Financing unless otherwise indicated
Less: Gain on Sale of PPE (2,000) 14000 24,000 Cost
Changes in Current Assets and Liabilities (12,000) AD Total Change in Cash from Operating Activities 975,100
(Increase) Accounts Receivable (63,000) 12,000 2,000
Decrease Prepaid Expenses 8,000 Gain Cash From Investing Activities
Increase Other Current Assets 4,000 Sale of PPE 43,000 from data set
Increase Accounts Payable 10,000 Capital Expenditures: PPE (125,000) (40,000) (85,000)
Increase Accrued Expenses 13,000 Purchase of Intangibles (95,000) ∆ cost sold
(Decrease) Other Current Liabilities (12,000) Other Non-Current assets 4,000
Total Cash Flows from Investing Activities (173,000)
Other Changes
Increase in Deferred Taxes 16,000 Deferrd incom taxes always Operating Cash Flows from Financing Activities Dividends would be here as cash down
Decrease in OtherNon-current Liabilities (2,000) a given acct. detail not avail to student Sale of Stock:Increase in Invested Capital 105,010
Total Change in Cash from Operating Activities 361,000 New Debt 470,000 Current Non-current net C & NC
Repayment of Debt (625,000) (470,000) 30,000 (185,000) (155,000)
Cash From Investing Activities ChangeforPPE Sold Cost Total Cash Flows from Financing Activities (49,990) New Debt (-)
Capital Expenditures (197,000) (173,000) (24,000) PPE
Other Non-current Assets 1,000 Net Change in Cash Position 752,110 0 Check
Proceeds from Sale of PPE 14,000 Sold PPE Opening Cash Balance 200,000
Total Cash Flows from Investing Activities (182,000) Ending Cash Balance 952,110
(600,000)
Cash Flows from Financing Activities 447,000
Repayment of Debt (600,000) (153,000) Debt
Additional borrowing 447,000 31,000 63,000 current
Sale of Common stockStock 125,000 1,100,000 915,000 non current
Purchase of treasury stock (12,000) 1,131,000 978,000 (153,000)
Use of treasury stock 50,000 down
Dividends paid (23,000)
Total Cash Flows from Financing Activities (13,000)
Net Change in Cash Position 166,000
Opening Cash Balance 150,000
Ending Cash Balance 316,000 0
Definition of 1 of 2
Cash Flow
This definition of cash flow provides a more accurate representation
the funds the company has available to repay its debt and
cash needs.
Cash flow from operations
= Net income:
=+ or - Non-cash Expenses (depreciation and amortization)
=+ or - Nonrecurring income and expenses (Extraordinary or discontinued Ops)
=+ or - Gain/loss on sales of fixed assets/LT intangibles - Other income/Expense
+/- Changes in operating accounts
(aka working capital accounts)
include:
• Accounts receivable Current Assets and Current liabilities for the most part
• Inventory
• Prepaid assets
• Other short-term assets
• Accounts payable
• Accrued liabilities
• Other short-term liabilities
Notice that this list includes any asset or liability classified as short-term
or current on the balance sheet except:
• Cash and cash equivalents we are measuring cash changes
• Short-term investments that's a cash equivalent
• Notes payable a note payable though short term is a form of debt, i.e., Financing
• Current Portion Long Term Debt This is short term because it’s the part of the long term debt
due within 12 months but it's still debt to outside party
not a supplier
Notice that this section of the balance sheet that includes long term
assets or liabilities that relate to the Income Statement such as
LT term deferred tax assets or liabilities
Cash Flow from Investing Activities:
• Uses of cash to acquire assets, such as capital
expenditures, investments and acquisitions
• Funds raised when any of these types of assets are sold are
shown in this section as sources of cash
Cash Flow from Financing Activities:
Shows increases or decreases in all sources of external
financing, such as short-term bank borrowings, commercial
paper, long-term bank debt, other long-term debt and
subordinated debt Bank & third party borrowings
Also includes equity transactions, such as cash generated by
stock issues or other capital injections, and cash used to
repurchase stock or to pay dividends
More invested capital less payments to owners
Debité = Cashê

Examine operating or financing

Run the business

External sources s

Internal Actions

Ch14 HW

Chapter 14
Cash Flow Homework
Create Cash Flow Statement
To be considered in CF preparation
1 New debt Acquired of $3000,000 120,000 Sold Common stock
2 Bought $200,000 of intangibles in later year 122,000 Sold Common stock
3 Sold PPE for $425000 which originally cost $475000 and had a BV of $100,000 1,915,000
4 Before buying treasury stock,purchase, some common stock issued (2,000,000) Bought stock for treasury
5 After the sale of common stock, purchased treasury stock 450,000
ClassCo
Balance Sheet
Assets YE 12/31/2xx2 YE: 12/31/2xx1
Current Assets
Cash And Cash Equivalents 8,452,000 8,170,000 282,000 use this for cash
Short Term Investments 300,000 270,000 30,000 O use this line as part of Operating
Net Receivables 3,674,000 4,073,000
Inventory 2,500,000 2,600,000
Other Current Assets 2,741,000 2,628,000
Total Current Assets 17,667,000 17,741,000
Long Term Investments [Investing] 12,000,000 11,850,000
Property Plant and Equipment 8,600,000 8,500,000
Accum. Depreciation 3,100,000 3,000,000
Intangible Assets 8,776,000 8,867,000
Other non-current assets [Investing] 2,625,000 2,634,000
Total Non-Current Assets 28,901,000 28,851,000
Total Assets 46,568,000 46,592,000
Liabilities
Current Liabilities
Accounts Payable 7,940,000 8,337,000
Current Portion of Long Term Debt 8,647,000 8,283,000
Total Current Liabilities 16,587,000 16,620,000
Long Term Debt 12,000,000 11,550,000
Deferred tax liabilities 256,000 281,000
Non-current liabilities [Financing] 333,000 456,000
Total Non-current liabilities 12,589,000 12,287,000
Total Liabilities 29,176,000 28,907,000
Stockholders' Equity
Common Stock 1,000,000 880,000 120,000 Sold Common stock
Capital Surplus[APIC or PIC] 7,927,000 7,805,000 122,000 Sold Common stock
Retained Earnings 10,915,000 9,000,000 1,915,000
Treasury Stock (2,000,000) - 0 (2,000,000) Bought stock for treasury
Dividends 450,000 - 0 450,000 Paid
Total Stockholder Equity 17,392,000 17,685,000
Total Liabilities & Stockholders' Equity 46,568,000 46,592,000
- 0 - 0
Statement of Income/[Loss] U
PERIOD ENDING YE 12/31/2xx2 YE: 12/31/2xx1
Total Revenue 8,450,000 8,900,000
Cost of Revenue 3,020,000 3,162,000
Gross Profit 5,430,000 5,738,000
Total Operating Expenses 3,186,000 3,205,000
Operating Income or Loss 2,244,000 2,533,000
Total Other (Income)/Expenses Net (337,000) 149,000 see 3. in Question
Interest Expense 111,000 89,000
Income Before Tax 2,470,000 2,295,000
Income Tax Expense 555,000 474,000
Net Income 1,915,000 1,821,000
Net Income Applicable To Common Shares 1,890,000 1,422,000
ASSETS UP CASH DOWN
ASSETS DOWN CASH UP
LIABILITIES UP CASH UP
LIABILITIES DOWN CASH DOWN
EQUITY UP CASH UP
EQUITY DOWN CASH DOWN
NON-CASH EXPENSES DEPRECIATION
AMORTIZATION
EXCEPTIONS GAIN/LOSS SALE LT ASSETS
CONTRA CCOUNTS OPPOSITE

Sheet3

Sheet1

Year
Item 2007 2006 2005 2004 2003
Sales $ 400,000 $ 355,000 $ 320,000 $ 290,000 $ 275,000
Cost of goods sold 285,000 250,000 225,000 198,000 190,000
Gross margin 115,000 105,000 95,000 92,000 85,000
&A
Page &P

Year

Item20072006200520042003

Sales400,000$ 355,000$ 320,000$ 290,000$ 275,000$

Cost of goods sold285,000 250,000 225,000 198,000 190,000

Gross margin115,000 105,000 95,000 92,000 85,000