Title: Problem 16-5BA
QA_Ori:
SATU COMPANY
Statement of Cash Flows
For Year Ended December 31, 2013
Cash flows from operating activities
Net income……………………………………………………………. $202,767
Adjustments to reconcile net income to net
cash provided by operating activities
Cash flows from investing activities
Cash paid for equipment…………………………………………… (30,250)
Title: Problem 16-6BB
QA_Ori:
SATU COMPANY
Statement of Cash Flows
For Year Ended December 31, 2013
Cash flows from operating activities
Cash received from customers (Note 1) …………………. $756,438
Cash flows from investing activities
Cash paid for equipment ………………………………………. (30,250)
Cash flows from financing activities
Supporting calculations
(2) Cost of Increase in Decrease in
goods sold inventory accounts payable =
(3) Income taxes expense + Decrease in income taxes payable
+
+
Title: Problem 16-7B
QA_Ori:
SALT LAKE COMPANY
Cash Flows from Operating Activities—Indirect Method
For Year Ended December 31, 2013
Cash flows from operating activities
Net income…………………………………………………………………….. $ 20,000
Adjustments to reconcile net income to net cash
provided by operating activities
Title: Problem 16-8BB
QA_Ori:
SALT LAKE COMPANY
Cash Flows from Operating Activities—Direct Method
For Year Ended December 31, 2013
Cash flows from operating activities
Cash receipts from customers (1)……………………………………………………$ 155,400
Supporting calculations
(1) Sales – Increase in receivables = $156,000 – ($3,600 – $3,000) = $155,400
(2) Cost of Decrease in Decrease in
goods sold inventory accounts payable =
(3) Salaries expense – Increase in salaries payable
(4) Rent expense – Decrease in prepaid rent
(5) Insurance expense – Decrease in prepaid insurance
(6) Utilities expense – Increase in utilities payable
–
+
Title: Serial Problem
QA_Ori:
SUCCESS SYSTEMS
Statement of Cash Flows (Indirect)
For Quarter Ended March 31, 2014
Cash flows from operating activities
Net income……………………………………………………………………..$ 18,686
Adjustments to reconcile net income to net
cash provided by operating activities
Increase in accounts receivable ($22,720 – $5,668)…………………(17,052)
Increase in inventory ($704 – $0)……………………………………….. (704)
Cash flows from investing activities
Net cash used in investing activities……………………………………… 0
Cash flows from financing activities
Title: Reporting in Action 1
QA_Ori: Polaris uses the indirect method of reporting operating cash flows.
We readily know this because the operating activity section of the cash flow
statement starts with net income, and makes adjustments for items such as
depreciation and changes in working capital.
Title: Reporting in Action 2
QA_Ori:
In all three years, Polaris’s cash flows from operating activities markedly
exceed the cash dividends paid, as can be seen from the table below:
($ thousands) 2011 2010 2009
Title: Reporting in Action 3
QA_Ori:
In 2011, the largest item in reconciling the difference between net income and
In 2010, the largest item in reconciling the difference between net income and
In 2009, the largest item in reconciling the difference between net income and
Title: Reporting in Action 4
QA_Ori:
In 2011, the largest cash inflow from investing activities was $11,950 thousand
In 2011, the largest cash inflow from financing activities was $100,000
In 2010, the largest cash inflow from investing activities was $17,910
In 2010, the largest cash inflow from financing activities was $68,105
Title: Reporting in Action 5:
QA_Ori: Answer depends on the financial statement information obtained.
Title: Comparative Analysis 1
QA_Ori:
Polaris’s cash flow on total assets ratio ($ thousands)
Current Year = Operating cash flows/Average total assets
Prior Year = Operating cash flows/Average total assets
Arctic Cat’s cash flow on total assets ratio ($ thousands)
Current Year = Operating cash flows/Average total assets
Prior Year = Operating cash flows/Average total assets
Title: Comparative Analysis 2
QA_Ori: The cash flow on total assets ratio reflects the return on average
Title: Comparative Analysis 3:
QA_Ori:
Title: Comparative Analysis 4
QA_Ori: Many business decision makers (such as analysts) feel that the cash
Title: Ethics Challenge 1
QA_Ori:
The business actions available include
a. Encourage early collection of receivables to reduce the accounts
receivable balance.
Many other business actions are possible that would accelerate cash receipts
and/or delay cash payments.
QA_Edit:
Title: Ethics Challenge 2
QA_Ori:
As a business owner, Katie Murphy certainly can exercise discretion over
In addition, Katie Murphy’s actions may be transparent to the banker when
Title: Communicating in Practice
QA_Ori:
Here is a sample of what the body of the memorandum might include:
TO: Diana Wood
FROM: (Your Name)
SUBJECT: Statement of Cash Flows
DATE: _________________
I am pleased to hear your business is more profitable this year than last.
The statement of cash flows (operating section) can be prepared using either of
I recommend that you request your accountant to provide you with a statement of
cash flows that is prepared using the direct method. This will identify exactly how
Note that good cash management is essential to business success and growth.
The statement of cash flows will provide you with a lot more information