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UGA ACCT 2102 - Statement of Cash Flows, Part II (Chapter 13)
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ACCT 2102 1st Edition Lecture 35 Outline of Last LectureI. Statement of Cash FlowsII. Organizing the StatementIII. Preparing the StatementIV. Direct Method of Preparing the Operating SectionOutline of Current Lecture:V. Preparing the Investing SectionVI. Preparing the Financing SectionVII. ExampleCurrent 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 InvestmentsPurchases 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 PaidThese 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 StatementFor the year ended December 31, 2011Sales $1,000,000Cost of Goods Sold (530,000)Gross Profit 470,000Selling and Administrative Expenses* (352,000)Operating Income 118,000Loss 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.Operating270,000 + 1,000,000 – 180,000 = 1,090,00080,000 + 45,000 = 125,000 Cash provided 1,215,000Investing<4,000><133,000>3,00015,000 Cash used <119,000>Financing140,000 + 114,000 – 1680,000 = 86,00095,000 10,000 Cash provided 191,000Total CashBeginning 10,000Net Cash 1,215,000<119,000> 191,000Total Cash


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UGA ACCT 2102 - Statement of Cash Flows, Part II (Chapter 13)

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