中级财ch21

1TheStatementofCashFlowsChapter2121.Defineoperating,investing,andfinancingactivities.2.Knowthecategoriesofinflowsandoutflowsofcash.3.Classifycashflowsasoperating,investing,orfinancing.4.Explainthedirectandindirectmethodsforreportingoperatingcashflows.5.Prepareasimplestatementofcashflows.ObjectivesContinued36.Useaworksheetforastatementofcashflows.7.Computeanddiscloseinterestpaidandincometaxespaid.8.Identifytheoperatingcashinflowsandoutflowsunderthedirectmethod(Appendix).9.Computetheoperatingcashflowsunderthedirectmethod(Appendix).Objectives4OperatingActivitiesOperatingactivitiesincludealltransactionsandothereventsthatarenotinvestingandfinancingactivities.Operatingactivitiesincludetransactionsinvolvingacquiring,selling,anddeliveringgoodsforsale,aswellasprovidingservices.Cashreceiptsfromthesaleofgoodsorservicesandcollectionsofaccountsreceivablearetypicalcashinflowsfromoperatingactivities.Cashpaymentstosuppliersforinventoryandonaccount,forwages,andfortaxesareexamplesofcashoutflowsfromoperatingactivities.5InvestingActivitiesTypicalinvestingactivitiesincludetransactionsinvolving:LendingmoneyandcollectingontheloanAcquiringandsellinginvestments(bothcurrentandnoncurrent)Acquiringandsellingproperty,plant,andequipment.6FinancingActivitiesTypicalfinancingactivitiesincludetransactionsinvolving:ObtainingresourcesfromownersDistributingreturnstoownersObtainingresourcesfromcreditorsRepayingcreditors7EquationforChangeinCashIncreasesinCash=IncreasesinLiabilities+IncreasesinStockholders’Equity+DecreasesinAssetsOtherThanCashThisequationisbasedonthefundamentalaccountingequation:A=L+SE8EquationforChangeinCashDecreasesinCash=DecreasesinLiabilities+DecreasesinStockholders’Equity+IncreasesinAssetsOtherThanCashAnd...9InflowsofCash1.DecreasesinAssetsOtherthanCash.Thesaleordisposalofanoncashassetcausesaninflowofcash.2.IncreasesinLiabilities.Theissuanceorotherincurrenceofliabilitiescausesaninflowofcash.3.IncreasesinStockholders’Equity.Netincomeandadditionalinvestmentsbyownersresultinaninflowofcash.10OutflowsofCash1.IncreaseinAssetsOtherthanCash.Theacquisitionofnoncashassetscausesanoutflowofcash.2.DecreasesinLiabilities.Thepaymentofliabilitiescausesanoutflowofcash.3.DecreasesinStockholdersEquity.Thepaymentofdividendsandtheacquisitionoftreasurystockaretwocommontransactionsthatresultinanoutflowofcash.11NetCashFlowfromOperatingActivitiesDecreaseinAccountsReceivableIncreaseinAccountsReceivable+-or=IncreaseinCashInflowsFromOperatingActivities=SalesRevenues12DecreaseinAccruedPayablesandIncreasesinInventoryIncreaseinAccruedPayablesandDecreaseinInventory+-or=IncreaseinCashOutflowsForOperatingActivities=NetCashFlowfromOperatingActivitiesExpenses(includingCostofGoodsSold)13CalculationofCashFlowsfromOperatingActivitiesSalesRevenueAccountsReceivableBal.030,00042,000SmithCompanymadecashsalesof$30,000andcreditsalesof$42,000.42,00014CalculationofCashFlowsfromOperatingActivitiesSalesRevenueAccountsReceivableBal.030,00042,000Duringtheyear$37,000wascollectedfromcreditors.37,00042,00015OperatingActivitiesSalesRevenueAccountsReceivableBal.030,00042,000Bal.72,00042,000Bal.5,00037,00016Bal.0OperatingActivitiesSalesRevenueAccountsReceivable30,00042,000Bal.72,00042,000Bal.5,00037,000SalesRevenue–IncreaseinAccountsReceivable=IncreaseinCashInflowsfromOperatingActivities$72,000$5,000=$67,00017OperatingActivitiesSalariesExpenseSalariesPayableBal.0SmithCompanypaidsalariesof$13,000andrecordedsalariespayableof$1,000duringtheyear.Atyear-end,theSalariesExpenseaccounthasadebitbalanceof$14,000.13,0001,0001,00018OperatingActivitiesSalariesExpenseSalariesPayableBal.013,0001,000Bal.14,000SmithCompanypaidsalariesof$13,000andrecordedsalariespayableof$1,000duringtheyear.Atyear-end,theSalariesExpenseaccounthasadebitbalanceof$14,000.1,000Bal.1,00019OperatingActivitiesSalariesExpenseSalariesPayableBal.013,0001,000Bal.14,0001,000Bal.1,000Expense–IncreaseinAccrued(Salaries)Payable=IncreaseinCashOutflowsforOperatingActivities$14,000–$1,000=$13,00020DirectMethodFASBStatementNumber95allowsachoiceofthedirectorindirectmethodtoreportcashflowsfromoperations.21DirectMethodSalesrevenue(cashandA/R)$70,000Less:Costofgoodssold(cashandA/P)$(29,000)Salariesexpense(cashandS/P)(13,000)Depreciationexpense(8,000)(50,000)Incomebeforeincometaxes$20,000Incometaxexpense(cash)(6,000)Netincome$14,000RyanCorporation’sIncomeStatement22DirectMethodCashflowsFromOperatingActivities:CashInflows:Cashreceivedfromcustomers$72,600Cashinflowsfromoperatingactivities$72,600CashOutflows:Cashpaidtosuppliers$(38,000)Cashpaidtoemployees(12,200)Cashpaidforincometaxes(6,000)Cashoutflowsforoperatingactivities(56,200)Netcashprovidedbyoperatingactivities$16,400Decreaseinaccountsreceivable($2,600)+salesrevenue($70,000)Increaseininventory($2,000)+decreaseinaccountspayable($7,000)+costofgoodssold($29,000).Salariesexpense–increaseinsalariespayableAmountpaidincash.23IndirectMethodNetCashflowsFromOperatingActivities:Netincome$14,000Adjustmentsfordifferencesbetweenincomeflowsandcashflowsforoperatingactivities:Add:Depreciatione