Chapter 13 Statement of Cash Flow I Statement of Cash Flow A Useffullness of Statement of Cash Flow reports the cash receipts cash payment and net change in cash resulting from operating investing and financing activites during a period a Entities ability to generate future cash flow b Entities ability to pay dividends and meet obligations c The reason for the difference b n net income and net cash provided by operating activities d Cash investing and financing transactions during the period B Classifications of Cash Flows a Operating Activities include the cash effects of tranasactions that create revenue and expenses They enter into the determination of net income i income statement items b Investing Activities and property plant and equipment and b lending money and collecting the loans include a acquiring and disposing of investments i Cash flow resulting from changes in investments and long term asset items c Financing Activities repaying the amounts borrowed and b obtaining cash from stockholders repurchasing shares and paying dividends include a obtaining cash from issuing debt and i Changes in long term liability and stockholders equity C Non Cash Activities a Direct issuance of common stock to purchasse assets b Conversion of bonds into common stock c Direct issuance of debt to purchase assets d Exchange of plant assets D Preparing Statement of Cash Flow a Comparative Balance Sheet b Current Income Statement c Additional Informtion E Indirect Direct Method Indirect Method a adjusts net income for items that do not effect cash i Easier and less costly to prepare ii Focuses on the differences b n net income and net cash flow from operating methods b Direct Methods more consistent with the objective of a statement of cash flows shoes operating cash receipts and payments making it II Preparing Statement of Cash Flow A Operating Activities converting accrual basis to cash basis a Add back non cash expenses i Depreciation ii Amortization iii Depletion b Deduct gains and add loses i Investments on financing activities c Analyze changes i Current liabilities account ii Noncash current assets NonCash Charges Gains Losses Change in Current Assets Current Liabilities Depreciation Expense Plant Amortization Expense Depletion Expense Loss on Sale of a Plant Asset Gain on Sale of a Plant Asset Increase in Current Asset Account Decrease in Current Asset Account Increase in Current Liabilities Account Decrease in Current Liabilities Account Add Add Add Add Deduct Deduct Add Add Deduct B Investing Financing Activities a Read 626 627 C Net Change on Cash III Using Cash Flow to Evaluate a Company A Free Cash Flow adjustment for capital expenditures and dividends describes the cash remaining from operations after Free Cash Flow Cash Provided by Operating Activities Cap Expenditures CashDividend
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