P17-5. Preparing and analyzing cash flow statement
Requirement 1:
Global Trading Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flow from operations
Net loss for the year ($279,500)
Cash flow from operations 354,500
Cash flow from financing activities
Cash flow from financing activities (342 ,500)
Net increase in cash 12,000
The following spreadsheet derives the amounts in the cash flow statement. For
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Requirement 2:
Global Trading reported a net loss in 2017, which is clearly an indication of
has declined in value.
However, examining the components of the reconciliation between net income
and operating cash flow suggests that the positive operating cash flow is
temporary and will not continue unless Global returns to profitability. Global
bills or anticipates having difficulty and is therefore trying to preserve cash.
Global did pay off its bank loan in 2017, although its situation would suggest
that this may have been because it was required to do so, either because the
and receivable balances as much as it did, unless it had been able to obtain
other financing.
It is likely Global was not able to find a new source of funding, and so it
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dividends in 2017, which, given the company’s situation, seems rather
imprudent.
Finally, the balance sheet indicates that fixed assets are almost fully
place, Global has little hope of turning around its performance.
Requirement 3:
Determination of bad debts written off can be obtained from T-account analysis
Determination of credit sales for the year can be obtained from T-account
analysis of accounts receivable:
account.
Requirement 4:
Effect of omission of inventory purchase:
Income Statement
No effect. (Purchases and ending inventory are understated by equal amounts.
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Statement of Cash Flows
Although the cash flow from operations are unaffected, two components are
Balance Sheet
P17-6. Reconciling changes in balance sheet accounts with amounts reported in
the cash flow statement
Requirement 1:
The 2015 cash flow statement showed an increase in accounts and notes
balance sheet ($182.1 million – $169.5 million = $12.6 million).
Possible explanations for the difference for accounts receivable include:
Foreign exchange translation adjustments whereby the U.S. dollar value of
the change in receivables.
Requirement 2:
Stanley Black & Decker had nearly $1.2 billion of operating cash flow. It was
partially offset by a $205 million investing cash outflow. Still, those two
million to repurchase common stock, and about $630 million to redeem
preferred stock in 2015.
P17-7. Preparing cash flow statement–indirect method
(AICPA adapted)
Cash flow for 2017 using the indirect method:
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Bergen Corporation
Statement of Cash Flows
For the Year Ended December 31, 2017
– Gain on sale of equipment (5,000)
– Increase in accounts receivable, net (90,000)
– Increase in inventories (115,000)
Purchase of equipment (392 ,000)
Net cash outflow from investing activities (264,000)
Net cash flow provided by financing activities 375 ,000
Net increase in cash 233,000
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P17-8. Working backward from the statement of cash flows
(2) DR Cash (Operations—Depreciation expense
add-back) $ 496,106
CR Accumulated depreciation $496,106
P,P&E add-back) $ 32,482
DR Cash (Investing—Proceeds from sale of
P,P&E) 4,150
CR Property, plant and equipment $36,632
accounts receivable) $140,082
(9) DR Cash (Operations—Decrease in
inventories) $ 2,302
CR Inventories $2,302
(10) DR Prepaid expenses $ 5,825
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(14) DR Cash (Operations—Increase in other
noncurrent liabilities) $ 24,434
CR Other noncurrent liabilities $24,434
(15) DR Property, plant and equipment $ 693,489
CR Cash (Financing—payment of
dividends) $325,295
(22) DR Cash (Financing—proceeds from other,
net) $ 18,530
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CR Other, net $18,530
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