Chapter 13
McGraw-Hill/Irwin
Company Name
Statement of Cash Flows
Period Covered
Cash flows from operating activities:
[List of individual inflows and outflows]
Net cash provided (used) by operating activities
$ #####
#####
#####
$ #####
13-4
Operating Activities
Inflows from:
Interest and dividends
received
Sales to customers
Outflows to:
Suppliers of merchandise and
services
Employees
Lenders for interest
Governments for taxes
Cash
Flows from
Operating
Activities
13-5
Investing Activities
Inflows from:
plant assets
Collection of principal on
loans
Cash
Flows from
Investing
Activities
Outflows to:
Purchase investments and
plant assets
Purchase debt or equity
investments
Make loans
13-6
Financing Activities
Inflows from:
borrowing
+
Owners (for example, from
issuing stock)
Outflows to:
Make payments on borrowed
funds
Owners for dividends
Purchase treasury stock
Cash
Flows from
Financing
Activities
13-7
Cash
Cash Equivalents
Currency
Company Name
Statement of Cash Flows
Period Covered
Cash flows from operating activities:
[List of individual inflows and outflows]
Net cash provided (used) by operating activities
$ #####
#####
The operating
Lets look at
cash flows section
the direct
#####
can be prepared
method
for
Net increase (decrease) in Cash
$ #####
using either the
preparing
the
Cash (and equivalents) balance at beginning
of period
#####
direct method or
Cash (and equivalents) balance at end of period
$ #####
Statement
of
the indirect
Cash Flows.
method.
Cash flows from financing activities:
[List of individual inflows and outflows]
Net cash provided (used) by financing activities
13-9
Decrease in
receivables
=
Cash
Received from
Customers
Net Sales
Increase in
receivables
=
13-10
$870,000
Cash Received
from Customers
$30,000
Increase in
receivables
13-11
Interest
=
Revenue
Dividends
Dividends
=
Received
Revenue
+ Decrease in
interest receivable
- Increase in interest
receivable
+ Decrease in
dividends receivable
- Increase in dividends
receivable
13-12
+ Increase in inventory
- Decrease in inventory
Step 2
Cash paid for
merchandise
= Purchases
+ Decrease in A/P
- Increase in A/P
13-13
= Expenses
+ Increase in
prepaid expenses
- Decrease in
prepaid expenses
+ Decrease in
accrued liabilities
- Increase in
accrued liabilities
13-14
Direct Method
Martin Co.
Martin
Co.
Comparative Balance Sheets - Liabilities and Equity
Comparative Balance Sheets - Assets
December 31,
December
31,
2008
2009
Accounts Payable
$2008
15,000 $2009
12,000
Salaries Payable
7,000
5,000
Cash Payable
$ 60,000
Interest
11,950 $ 70,370
7,350
Accounts
net
27,000
35,000
Income
TaxReceivable,
Payable
20,000
17,000
Notes
Payable, 1st Bank
70,000
60,000
Inventory
230,000
200,000
Bonds Payable
250,000
150,000
Trading
Securities
25,000
Premium on Bonds Payable
5,000
4,000
Equipment, net
Common
Stock
Investments
Retained Earnings
Total Assets
500,000
450,000
100,000
425,000
500,000
130,000
88,050
130,020
$ 917,000
$ 917,000
$ 885,370
$ 885,370
13-15
Direct Method
Martin Co.
Income Statement Amounts
For the Year Ending December 31, 2009
Sales Revenues
Cost of Goods Sold
Depreciation Expense
Interest Expense
Income Tax Expense
Salary Expense
Other Expenses
Amortization of Bond Premium
Gain on Sale of Equipment
Extraordinary Loss
Equity in Investee Income
$ 800,000
560,000
5,000
28,050
27,980
80,000
71,000
1,000
3,000
30,000
40,000
Net Income
41,970
13-16
Direct Method
Additional Information
Trading Securities were purchased during 2009 at a cost of
$25,000.
Equipment with a book value of $40,000 was sold during the
year for $43,000.
Equipment with a book value of $30,000 was destroyed during a
freak flood in 2009. There was no insurance.
Martin owns 25% of the common stock of another company and
uses the equity method to account for this investment.
Martins tax rate is 40%.
The Notes Payable to the bank carry a 12% rate. The payments
are due on the first day of each month.
The Bonds Payable carry a 9% rate. Interest is payable
semiannually on July 1 & Jan. 1.
Sold stock during 2009 for $50,000.
Received $10,000 dividends from its equity investment.
13-17
Direct Method
Cash Received from Customers
Sales Revenues
Less: Increase in A/R
$ 800,000
(8,000)
$ 792,000
80,000
2000
2,000
82,000
13-18
Direct Method
Cash Paid for Inventory
Cost of Goods Sold
$ 560,000
3,000
(30,000)
$ 533,000
28,050
2000
4,600
32,650
13-19
Direct Method
Cash Paid for Taxes
Income Tax Expense
Add: Decrease in Taxes Payable
27,980
2000
3,000
30,980
10,000
(25,000)
(71,000)
$ (86,000)
13-20
Direct Method
Cash Flows From Operating
Activities
Cash Received from Customers
792,000
(82,000)
(533,000)
(32,650)
(30,980)
(86,000)
27,370
13-21
Martin Co.
Equipment Statement
with a book of
value
of Flows
Cash
$40,000 was sold for $43,000.
For the Period Ending December 31, 2009
Operating Cash Flows
$ 27,370
$ 50,000
(100,000)
(10,000)
43,000
(60,000)
Net Cash
Flows
for the
Period from
Notes
Payable
decreased
$ 10,370
$70,000 to $60,000
during 2009.
Add: Beginning
Cash Balance
60,000
$ 70,370
13-22
Martin Co.
Statement of Cash Flows
For the Period Ending December 31, 2009
$ 27,370
43,000
$ 50,000
(100,000)
(10,000)
(60,000)
$ 10,370
60,000
$ 70,370
13-23
Depreciation Expense
13-24
Net
Income
+ Losses and
- Gains
+ Noncash
expenses such as
depreciation and
amortization
13-25
Current
Assets
Current
Liabilities
13-29
50,000
40,000
320,000
240,000
600,000
$ 1,250,000
150,000
60,000
500,000
160,000
380,000
$ 1,250,000
45,000
25,000
330,000
235,000
640,000
$ 1,275,000
160,000
45,000
70,000
350,000
160,000
490,000
$ 1,275,000
13-30
The Worksheet
AUTO SUPPLY COMPANY
Worksheet for Statement of Cash Flows
For the Year Ended December 31, 2009
Effects of Transactions
Beginning
Debit
Credit
Balance
Changes
Changes
50,000
40,000
320,000Sources of
240,000
Cash
600,000
1,250,000
(1) 250,000
150,000
60,000
500,000
160,000
380,000
1,250,000
Ending
Balance
45,000
25,000
Uses of 330,000
Cash 235,000
640,000
1,275,000
(1) 250,000
160,000
45,000
70,000
350,000
160,000
490,000
1,275,000
13-32
The Worksheet
Sources of
Uses of
Cash
AUTO SUPPLYCash
COMPANY
Cash effects:
Operating activities: Worksheet for Statement of Cash Flows
For the Year Ended December 31, 2009
Net income
(1) 250,000 Effects of Transactions
Credit
Depreciation expense
(3)Beginning
60,000 Debit
Balance sheet effects:
Assets
Cash
Marketable securities
Accounts receivable
Inventory
Plant and equipment (net of depreciation)
Investing activities:
Totals
Liabilities & Stockholders' Equity
Accounting payable
Accured expenses payable
Financing activities:
Mortage note payable (long-term)
BondsDividends
payable (duepaid
in 2020)
Capital stock (no par)
Retained
Netearnings
change in cash
Totals
Balance
Changes
50,000
40,000
320,000
240,000
600,000
1,250,000
150,000
60,000
500,000
160,000
380,000
1,250,000
Changes
(3) 60,000
(2) 140,000
(2) 140,000
(1) 250,000
Ending
Balance
45,000
25,000
330,000
235,000
640,000
1,275,000
160,000
45,000
70,000
350,000
160,000
490,000
1,275,000
13-33
The Worksheet
AUTO SUPPLY
COMPANY
Sources
of
Uses of
Worksheet
for Statement
of Cash Flows
Cash effects:
Cash
Cash
For the Year Ended December 31, 2009
Operating activities:
Effects of Transactions
Net income
(1) 250,000
Beginning
Debit
Credit
Depreciation expense
(3) 60,000
Balance sheet
effects:receivable
Balance
Changes
Increase
in accounts
(4) 10,000Changes
Assets in inventory
Decrease
(5) 5,000
Cash
Increase in accounts payable
(6) 10,000 50,000
Marketableinsecurities
40,000
Decreases
accrued expenses
(7)
15,000
Accounts receivable
320,000 (4) 10,000
Inventory
240,000
(5) 5,000
Plant and equipment (net of depreciation)
600,000
(3) 60,000
Totals
1,250,000
Liabilities & Stockholders' Equity
Accounting payable
150,000
(6) 10,000
Accured expenses payable
60,000 (7) 15,000
Mortage note payable (long-term)
Bonds payable (due in 2020)
500,000
Capital stock (no par)
160,000
Retained earnings
380,000 (2) 140,000 (1) 250,000
Totals
1,250,000
Ending
Balance
45,000
25,000
330,000
235,000
640,000
1,275,000
160,000
45,000
70,000
350,000
160,000
490,000
1,275,000
13-34
The Worksheet
AUTO SUPPLY COMPANY
Cash effects:
Sources of for
Cash
Uses of Cash
Worksheet
Statement
of Cash Flows
Operating activities:
For the Year Ended December 31, 2009
Net income
(1) 250,000
Effects of Transactions
Depreciation expense
(3) 60,000
Beginning
Debit
Credit
Increase in accounts receivable
(4) 10,000
Balance sheet effects:
Balance
Changes
Changes Ending Balance
Decrease in inventory
(5) 5,000
Assets
Increase in accounts payable
(6) 10,000
Cash
50,000
45,000
Decreases in accrued expenses
(7)
15,000
Marketable
40,000
(8) 15,000
25,000
Gain
on sale securities
of securities
(8)
20,000
Accounts activities:
receivable
320,000 (4) 10,000
330,000
Investing
Inventoryfor sale of securities
(5) 5,000
235,000
Preceeds
(8) 35,000 240,000
Plantacquired
and equipment
600,000
(9) 100,000 (3) 60,000
640,000
Plant
for cash(net of depreciation)
(9) 30,000
Totals activities:
1,250,000
1,275,000
Financing
Dividends
(2) 140,000
Liabilities paid
& Stockholders' Equity
Retirement
bonds payable
(10)
150,000
Accounting of
payable
150,000
(6) 10,000
160,000
Net
decrease
in
cash
5,000
Accured expenses payable
60,000 (7) 15,000
45,000
Mortage note payable (long-term)
(9) 70,000
70,000
Bonds payable (due in 2020)
500,000 (10) 150,000
350,000
Capital stock (no par)
160,000
160,000
Retained earnings
380,000 (2) 140,000 (1) 250,000
490,000
Totals
1,250,000
415,000
410,000
1,275,000
13-35
The Worksheet
AUTO SUPPLY COMPANY
Cash effects:
Sources of
Uses of
Worksheet
forCash
Statement
of Cash Flows
Operating activities:
For the Year Ended December 31, 2009
Net income
(1) 250,000
Effects of Transactions
Depreciation expense
(3) 60,000
Beginning
Debit
Credit
Increase
in
accounts
receivable
(4)
10,000
Balance sheet effects:
Balance
Changes
Changes Ending Balance
Decrease in inventory
(5) 5,000
Assets
Increase in accounts payable
(6) 10,000
Cash
50,000
(x) 5,000
45,000
Decreases in accrued expenses
(7) 15,000
Marketable securities
40,000
(8) 15,000
25,000
Gain on sale of securities
(8) 20,000
Accounts receivable
320,000 (4) 10,000
330,000
Investing activities:
Inventory
240,000
(5) 5,000
235,000
Preceeds for sale of securities
(8) 35,000
Plant and equipment (net of depreciation)
600,000 (9) 100,000 (3) 60,000
640,000
Plant acquired for cash
(9) 30,000
Totals activities:
1,250,000
1,275,000
Financing
Liabilities
Stockholders' Equity
Dividends&paid
(2) 140,000
Accounting
150,000
(6) 10,000
160,000
Retirementpayable
of bonds payable
(10) 150,000
Accured
expenses
payable
(7) 15,000
45,000
Net decrease
in cash
(x) 5,000 60,0005,000
Mortage note payable (long-term)
(9) 70,000
70,000
Bonds payable (due in 2020)
500,000 (10) 150,000
350,000
Capital stock (no par)
160,000
160,000
Retained earnings
380,000 (2) 140,000 (1) 250,000
490,000
Totals
1,250,000
415,000
415,000
1,275,000
13-36
Supplemental Information
We are required to disclose information concerning
major investing and financing activities that do not
involve cash.
AUTO SUPPLY COMPANY
Supplementary Schedule: Noncash Investing and Financing Activities
Purchases of plant assets
Less: Portion financed by issuance of long-term debt
Cash paid to acquire plant assets
$ 100,000
70,000
$ 30,000
13-38
End of Chapter 13
13-39