Quản trị Kinh doanh - Chapter 16: Reporting the statement of cash flows

Reporting the Statement of Cash FlowsChapter 16PowerPoint Editor: Beth Kane, MBA, CPACopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.How does a company receive its cash?Where does a company spend its cash?What explains the change in the cash balance?Purpose of the Statementof Cash Flows2What explains the change in the cash balance?Why do income and cash flows differ?Where does a company spend its cash?How does a company receive its cash?Importance of Cash Flows3Cash equivalents areshort-term, highly liquid investments.readily convertible into cash.sufficiently close to maturity so that market value is unaffected by interest rate changes.Measurement of Cash Flows4 16-C1: Classification of Cash Flows 5Classification of Cash Flows The Statement of Cash Flows includes the following three sections:Operating ActivitiesInvesting ActivitiesFinancing ActivitiesC16Operating ActivitiesC17Investing ActivitiesC18Financing ActivitiesC19Noncash Investing and FinancingC1Examples of Noncash Investing and Financing Activities10 16-P1: Preparing the Statement of Cash Flows 11Format of the Statementof Cash Flows12P1Preparing the Statementof Cash FlowsP113Analyzing the Cash AccountP1The Cash account is a natural place to look for information about cash flows from operating, investing, and financing activities. 14Analyzing Noncash AccountP1A second approach to preparing the statement of cash flows is analyzing noncash accounts. 15Information to Prepare the StatementP1Comparative Balance SheetsCurrent Income StatementAdditional InformationInformation to prepare the statement of cash flows usually comes from three sources: 16NEED-TO-KNOWClassify the following cash flows as operating, investing, or financing activities.a.Purchase equipment for cashg.Cash paid for utilitiesb.Cash payment of wagesh.Cash paid to acquire investmentsc.Issuance of stock for cashi.Cash paid to retire debtd.Receipt of cash dividends from investmentsj.Cash received as interest on investmentse.Cash collections from customersk.Cash received from selling investmentsf.Note payable issued for cashl.Cash received from a bank loanOperating activities - Day-to-day cash receipts and disbursements that determine net income (Generally related to current assets and current liabilities.)Investing activities - Cash receipts and disbursements generally related to the purchase and sale of long-term assets. (And non-operating short-term investments)Financing Activities - Cash receipts and disbursements generally related to long-term liabilities and equity. (And non-operating short-term debts)C117FinancingInvestingOperatingNEED-TO-KNOWCurrent assetsCurrent liabilitiesPlant assetsLong-term liabilitiesEquityTotal assetsTotal liabilities and equityXYZ CompanyBalance SheetDecember 31, 20X1AssetsLiabilitiesP118NEED-TO-KNOWb.Cash payment of wagesd.Receipt of cash dividends from investmentse.Cash collections from customersg.Cash paid for utilitiesj.Cash received as interest on investmentsa.Purchase equipment for cashh.Cash paid to acquire investmentsk.Cash received from selling investmentsc.Issuance of stock for cashf.Note payable issued for cashi.Cash paid to retire debtl.Cash received from a bank loanOperating activities - Day-to-day cash receipts and disbursements that determine net income (Generally related to current assets and current liabilities.)Investing activities - Cash receipts and disbursements generally related to the purchase and sale of long-term assets. (And non-operating short-term investments)Financing Activities - Cash receipts and disbursements generally related to long-term liabilities and equity. (And non-operating short-term debts)Classify the following cash flows as operating, investing, or financing activities.a.Purchase equipment for cashg.Cash paid for utilitiesb.Cash payment of wagesh.Cash paid to acquire investmentsc.Issuance of stock for cashi.Cash paid to retire debtd.Receipt of cash dividends from investmentsj.Cash received as interest on investmentse.Cash collections from customersk.Cash received from selling investmentsf.Note payable issued for cashl.Cash received from a bank loanP119Cash Flows from OperatingIndirect and Direct Methods of ReportingThe net cash amount provided by operating activities is identical under both the direct and indirect methods.Direct MethodIndirect Method20P1 16-P2: Applying the Indirect Method of Reporting 21These financial statements will help us prepare the statement of cash flows for Genesis using the indirect method. 22Applying the Indirect Method of ReportingP2Additional information on Genesis Inc.’s 2015 transactions:a. The accounts payable balances result from inventory purchases. b. Purchased $60,000 in plant assets by issuing $60,000 of notes payable. c. Sold plant assets with a book value of $8,000 (original cost of $20,000 and accumulated depreciation of $12,000) for $2,000 cash, yielding a $6,000 loss. d. Received $15,000 cash from issuing 3,000 shares of common stock. e. Paid $18,000 cash to retire notes with a $34,000 book value, yielding a $16,000 gain. f. Declared and paid cash dividends of $14,000. 23Net IncomeCash Flows from Operating ActivitiesChanges in noncash current assets and current liabilities+ Losses and - Gains+ Noncash expenses such as depreciation and amortizationApplying the Indirect Method of ReportingP212324Use this table when adjusting Net Income to Operating Cash Flows.Adjustments for Changes in Current Assets and Current LiabilitiesP225P2Adjustments for Changes in Current Assets and Current Liabilities26P2Adjustments for Operating Items Not Providing or Using Cash27P2Adjustments for Nonoperating Items28P2Summary of Adjustments for Indirect MethodCommon adjustments to net income when computing net cash provided or used by operating activities under the indirect method:29NEED-TO-KNOWAt December 31Current Yr.Prior Yr.Sales revenue$120Accounts receivable$12$10Expenses:Inventory69Cost of goods sold50Accounts payable711Depreciation expense30Salaries payable83Salaries expense17Interest payable10Interest expense3Net income$20Selected Balance Sheet AccountsIncome StatementFor Current Year Ended December 31A company’s current year income statement and selected balance sheet data at December 31 of the current and prior years follow. Prepare the cash flows from operating activities section only of its statement of cash flows using the indirect method for the current year.P230NEED-TO-KNOWNet incomeAdjustments to reconcile net income to net cash provided by operating activitiesAdjust for changes in current operating assets (other than cash)Opposite directionAdd the decreasesSubtract the increasesAdjust for changes in current operating liabilitiesSame directionAdd the increasesSubtract the decreasesAdjust for non-cash revenues and expensesOpposite directionAdd any expenses that don't require cashSubtract any revenues that don't provide cashAdjust for any gains/losses related to long-term accountsOpposite directionAdd the lossesSubtract the gainsNet cash provided (used) by operating activitiesGeneral Format - Operating Activities section - Indirect methodP231NEED-TO-KNOWAt December 31Current Yr.Prior Yr.Sales revenue$120Accounts receivable$12$10Expenses:Inventory69Cost of goods sold50Accounts payable711Depreciation expense30Salaries payable83Salaries expense17Interest payable10Interest expense3Net income$20Selected Balance Sheet AccountsIncome StatementFor Current Year Ended December 31Net income$20Depreciation expense30Increase in accounts receivable(2)Decrease in inventory3Decrease in accounts payable(4)Increase in salaries payable5Increase in interest payable133Net cash provided by operating activities$53Adjustments to reconcile net income to net cash provided by operating activities:General Format - Operating Activities section - Indirect methodP232 16-P3: Cash Flows from Investing and Financing Activities 33P3Cash Flows from InvestingIdentify changes in investing-related accountsExplain these changes using reconstruction analysisReport their cash flow effectsA three-stage process to determine cash provided or used by investing activities:34P3Cash Flows from InvestingThis analysis reveals a $40,000 increase in plant assets from $210,000 to $250,000 and a $12,000 increase in accumulated depreciation from $48,000 to $60,000.35P3Cash Flows from InvestingItem b: Genesis purchased plant assets of $60,000 by issuing $60,000 in notes payable to the seller. We also reconstruct the entry for Depreciation Expense using information from the income statement. Item c reports that Genesis sold plant assets costing $20,000 (with $12,000 of accumulated depreciation) for $2,000 cash, resulting in a $6,000 loss.36NEED-TO-KNOWUse the following information to determine this company’s cash flows from investing activities.a.A factory with a book value of $100 and an original cost of $800 was sold at a loss of $10.b.Paid $70 cash for new equipment.c.Long-term stock investments were sold for $20 cash, yielding a loss of $4.d.Sold land costing $175 for $160 cash, yielding a loss of $15.We use a three-stage process to determine cash provided or used by investing activities:(1) identify changes in investing-related accounts, (2) explain these changes using reconstruction analysis, and (3) report their cash flow effectsP337NEED-TO-KNOWa.A factory with a book value of $100 and an original cost of $800 was sold at a loss of $10.Cash flows from operating activities:Net income$XXXLoss on sale of factory10Cash flows from investing activities:Cash received from sale of factory90Cost800To date700Book Value = $100Adjustments to reconcile net income to net cash provided by operating activities:FactoryAccumulated DepreciationDebitCredita)Cash90Loss on sale of factory10Accumulated Depreciation700Factory800General JournalP338NEED-TO-KNOWb.Paid $70 cash for new equipment.Cash flows from operating activities:Net income$XXXLoss on sale of factory10Cash flows from investing activities:Cash received from sale of factory90Cash paid for new equipment(70)Adjustments to reconcile net income to net cash provided by operating activities:DebitCreditb)Equipment70Cash70General JournalP339NEED-TO-KNOWc.Long-term stock investments were sold for $20 cash, yielding a loss of $4.Cash flows from operating activities:Net income$XXXLoss on sale of factory10Loss on sale of investments4Cash flows from investing activities:Cash received from sale of factory90Cash paid for new equipment(70)Cash received from sale of long-term investments20Adjustments to reconcile net income to net cash provided by operating activities:DebitCreditc)Cash20Loss on sale of investments4Long-term investments24General JournalP340NEED-TO-KNOWd.Sold land costing $175 for $160 cash, yielding a loss of $15.Cash flows from operating activities:Net income$XXXLoss on sale of factory10Loss on sale of investments4Loss on sale of land15Cash flows from investing activities:Cash received from sale of factory90Cash paid for new equipment(70)Cash received from sale of long-term investments20Cash received from sale of land160Net cash provided by investing activities$200Adjustments to reconcile net income to net cash provided by operating activities:DebitCreditd)Cash160Loss on sale of land15Land175General JournalP341P3Cash Flows from FinancingIdentify changes in financing-related accountsExplain these changes using reconstruction analysisReport their cash flow effectsA three-stage process to determine cash provided or used by financing activities:42P3Cash Flows from FinancingThis analysis reveals: an increase in notes payable from $64,000 to $90,000. 43P3Cash Flows from FinancingItem e: Notes with a carrying value of $34,000 are retired for $18,000 cash, resulting in a $16,000 gain. 44P3Cash Flows from FinancingItem d: Issued 3,000 shares of common stock at par for $5 per share. Item f: Cash dividends of $14,000 are paid. 45P346NEED-TO-KNOWUse the following information to determine this company’s cash flows from financing activities.a.Issued common stock for $40 cash.b.Paid $70 cash to retire a note payable at its $70 maturity value.c.Paid cash dividend of $15.d.Paid $5 cash to acquire its treasury stockCash flows from financing activities:Cash received from issuance of common stock$40Cash paid to settle note payable(70)Cash paid for dividend(15)Cash paid to acquire treasury stock(5)Net cash used by financing activities($50)DebitCredita)Cash40Common Stock40b)Notes payable70Cash70c)Retained earnings15Cash15d)Treasury stock5Cash5General JournalP347P3Overall Summary Using T-Accounts48Global ViewReporting Cash Flows from OperatingBoth U.S. GAAP and IFRS permit the reporting of cash flows from operating activities using either the direct or indirect method. However, two notable differences include: U.S. GAAP requires cash inflows from interest revenue and dividend revenue be classified as operating, whereas IFRS permits classification under operating or investing provided that this classification is consistently applied across periods.U.S. GAAP requires cash outflows for interest expense be classified as operating, whereas IFRS again permits classification under operating or financing provided that it is consistently applied across periods.Reporting Cash Flows from Investing and FinancingU.S. GAAP and IFRS are broadly similar in computing and classifying cash flows from investing and financing activities. One notable exception is that U.S. GAAP requires cash outflows for income tax be classified as operating, whereas IFRS permits the splitting of those cash flows among operating, investing, and financing depending on the sources of that tax.49 16-A1: Cash Flow Analysis 50Analyzing Cash Sources and UsesA1Most managers stress the importance of understanding and predicting cash flows for business decisions. 51 Used, along with income-based ratios, to assess company performance.Cash flow on total assets =Operating cash flows Average total assetsCash Flow on Total AssetsA152 16-P4: Spreadsheet Preparation of the Statement of Cash Flows 53P4A spreadsheet, also called work sheet or working paper, can help us organize the information needed to prepare a statement of cash flows.Appendix 16A: Spreadsheet Preparation of the Statement of Cash Flows54 16-P5: Direct Method of Reporting Operating Cash Flows 55Appendix 16B: Direct Method of Reporting Operating Cash FlowsP5Adjust income statement accounts related to operating activities for changes in their related balance sheet accounts:Framework for reporting cash receipts and cash payments 56Appendix 16B: Direct Method of Reporting Operating Cash FlowsP557End of Chapter 1658