ACCT 2102 1st Edition Lecture 35 Outline of Last Lecture I Statement of Cash Flows II Organizing the Statement III Preparing the Statement IV Direct Method of Preparing the Operating Section Outline of Current Lecture V Preparing the Investing Section VI Preparing the Financing Section VII Example Current Lecture Statement of Cash Flows Part II Chapter 13 V Preparing the Investing Section Typical transactions reported in the section include transactions related to the purchase and sale of long term assets Purchase of PPE Sale of PPE Purchase or Sale of Investments Purchases and Sales are reported as separate line items in the Investing Section VI Preparing the Financing Section Typical transactions reported in the section include either generate capital for the company or pay it back Long Term Liabilities The change can be either new borrowings source of cash or the repayment of principal on existing debt use of cash Common Stock The change can be either the issuance of stock source of cash or the purchase of treasury stock use of cash Retained Earnings Beg RE Net Income End RE Dividends Declared Beg Dividends Payable Dividends Declared End Dividends Payable Dividends Paid These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute VII Preparing the Statement Example The following Income Statement was extracted from the accounting records of Loco for Cocoa Inc a retailer of gourmet chocolate candies Loco for Cocoa Inc Income Statement For the year ended December 31 2011 Sales 1 000 000 Cost of Goods Sold 530 000 Gross Profit 470 000 Selling and Administrative Expenses 352 000 Operating Income 118 000 Loss on Sale of Equipment 4 000 Net Income 114 000 Includes 29 000 of depreciation expense All of the company s sales are made on account At the beginning of the year the Accounts Receivable balance was 270 000 The balance had decreased by 90 000 by year end All of the company s inventory purchases are made on account Accounts Payable consists solely of inventory purchases At the beginning of the year the Inventory balance was 160 000 At year end the Inventory balance was 205 000 The Accounts Payable balance decreased by 80 000 during the year The beginning Retained Earnings balance was 140 000 and the ending Retained Earnings balance was 168 000 All declared dividends were paid during the year The following additional transactions occurred during the year A new machine was purchased for 133 000 replacing a machine that was sold for 3 000 cash A long term investment was sold for 15 000 95 000 in Bonds Payable were issued 10 000 was received for additional Common Stock issued A Calculate the company s ending cash balance reported on the Balance Sheet given a beginning cash balance of 10 000 B Condense the prepared statement Operating 270 000 1 000 000 180 000 80 000 45 000 Cash provided 1 090 000 125 000 1 215 000 Investing 4 000 133 000 3 000 15 000 Cash used 119 000 Financing 140 000 114 000 1680 000 Cash provided Total Cash Beginning Net Cash Total Cash 86 000 95 000 10 000 191 000 10 000 1 215 000 119 000 191 000 1 287 000
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