FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS
FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS
24th Edition
ISBN: 9781265497613
Author: Wild
Publisher: MCG
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Chapter 16, Problem 1AA
To determine

Concept Introduction:

Introduction:

Cash Flow Statements:

Cash flow statements are an integral part of the financial statements of a company. They reflect the direction and movement of the cash inflows and outflows during a reporting period. The cash inflows and outflows are segregated into the following activities:

Cash flows from Operating activities − The cash inflows refer to sales and income from operating activities and cash outflows include both cash and non-cash outflows from the operating activities i.e. the day to day activities of the business.

Cash flows from Investing activities − The cash inflows refer to sales and income from investing activities and cash outflows include cash outflows from the investing activities in the form of purchase of fixed assets and investments.

Cash flows from Financing activities − The cash inflows refer to income from financing activities such as raising share capital and debt and cash outflows include cash outflows from the financing activities in the form of dividends and interest paid.

There are two methods of preparing cash flow statements:

Direct Method − It measures the actual cash inflows and cash outflows that are affected during a particular reporting period. The actual cash flows do not include non-cash items and items that are recorded owing to the accrual principle.

Indirect Method −It measures the cash inflows and cash outflows that are affected during a particular reporting period including the non-cash items and items that are recorded owing to the accrual principle.

Requirement 1:

The method of preparation of the cash flow statements of Apple.

Expert Solution
Check Mark

Answer to Problem 1AA

The cash flow statements of Apple are prepared under the Indirect Method.

Explanation of Solution

The Indirect method of preparation of cash flow statements measures the cash inflows and cash outflows that are affected during a particular reporting period including the non-cash items and items that are recorded owing to the accrual principle.

Cash inflows and outflows from both balance sheet accounts such as accounts receivable, accounts payable, inventory etc as well as Income statement accounts such as Sales, Depreciation Expense etc. and the changes in the values from the preceding period and the effect of the same on the net income is detailed in the cash flow statement of the current year.

Cash flows under the indirect method take into account a comprehensive view of the cash flows for the year and hence are the more preferred method of preparation of cash flow statements.

Non cash items include depreciation, amortization expenses, prepaid expenses etc. and the accrual principle requires items of the financial statements to reflect data of the current reporting period and hence the indirect method is preferred.

Hence the method of preparation of the cash flow statements of Apple is explained.

To determine

Concept Introduction:

Introduction:

Cash Flow Statements:

Cash flow statements are an integral part of the financial statements of a company. They reflect the direction and movement of the cash inflows and outflows during a reporting period. The cash inflows and outflows are segregated into the following activities:

Cash flows from Operating activities − The cash inflows refer to sales and income from operating activities and cash outflows include both cash and non-cash outflows from the operating activities i.e. the day to day activities of the business.

Cash flows from Investing activities − The cash inflows refer to sales and income from investing activities and cash outflows include cash outflows from the investing activities in the form of purchase of fixed assets and investments.

Cash flows from Financing activities − The cash inflows refer to income from financing activities such as raising share capital and debt and cash outflows include cash outflows from the financing activities in the form of dividends and interest paid.

There are two methods of preparing cash flow statements:

Direct Method − It measures the actual cash inflows and cash outflows that are affected during a particular reporting period. The actual cash flows do not include non-cash items and items that are recorded owing to the accrual principle.

Indirect Method −It measures the cash inflows and cash outflows that are affected during a particular reporting period including the non-cash items and items that are recorded owing to the accrual principle.

Requirement 2:

Identification of the cash flows from operating activities and amount paid for dividends for the years 2017,2016 and 2015.

Expert Solution
Check Mark

Answer to Problem 1AA

The cash flows from operating activities and amount paid for dividends for the years 2017, 2016 and 2015 are as follows:

    Particulars2017 ($ Million)2016 ($ Million)2015 ($ Million)
    Cash flows from Operations64.23 Billon66.23 Billion81.27 Billion
    Dividends Paid12.77 Billion12.15 Billion11.56 Billion

Explanation of Solution

The Cash flows from Operations are the excess of income through sales of goods and services over the expenses of operations and include direct costs in the form of material, labour and overheads and indirect costs including depreciation, selling and distribution expenses etc.

The cash flows from operations also include effect of changes to current assets and current liabilities in the reporting period.

The Cash flows from operations decrease from $81.27 Million Billion to $64.23 Million Billion over a period of 3 years from 2015 to 2017.

Dividends Paid are returns to shareholders of the company in the form of distribution of profits. It is essential to pay dividends to meet investor expectations.

The Dividends paid increase from $11.56 Million Billion to $12.77 Million Billion over a period of 3 years from 2015 to 2017.

Hence cash flows from operating activities and amount paid for dividends for the years 2017,2016 and 2015 are listed.

To determine

Concept Introduction:

Introduction:

Cash Flow Statements:

Cash flow statements are an integral part of the financial statements of a company. They reflect the direction and movement of the cash inflows and outflows during a reporting period. The cash inflows and outflows are segregated into the following activities:

Cash flows from Operating activities − The cash inflows refer to sales and income from operating activities and cash outflows include both cash and non-cash outflows from the operating activities i.e. the day to day activities of the business.

Cash flows from Investing activities − The cash inflows refer to sales and income from investing activities and cash outflows include cash outflows from the investing activities in the form of purchase of fixed assets and investments.

Cash flows from Financing activities − The cash inflows refer to income from financing activities such as raising share capital and debt and cash outflows include cash outflows from the financing activities in the form of dividends and interest paid.

There are two methods of preparing cash flow statements:

Direct Method − It measures the actual cash inflows and cash outflows that are affected during a particular reporting period. The actual cash flows do not include non-cash items and items that are recorded owing to the accrual principle.

Indirect Method −It measures the cash inflows and cash outflows that are affected during a particular reporting period including the non-cash items and items that are recorded owing to the accrual principle.

Requirement 3:

If cash flows from operations for the year 2017 were sufficient to pay dividends

Expert Solution
Check Mark

Answer to Problem 1AA

The cash flows from operations for the year 2017 were sufficient to pay dividends as they exceed the dividends paid by almost 5 times.

Explanation of Solution

The cash flows from operating activities and amount paid for dividends for the years 2017 are as follows:

    Particulars2017 ($ Million)
    Cash flows from Operations64.23 Billon
    Dividends Paid12.77 Billion

The Cash flows from Operations are the excess of income through sales of goods and services over the expenses of operations and include direct costs in the form of material, labour and overheads and indirect costs including depreciation, selling and distribution expenses etc.

The cash flows from operations also include effect of changes to current assets and current liabilities in the reporting period.

The Cash flows from operations decrease from $81.27 Million Billion to $64.23 Million Billion over a period of 3 years from 2015 to 2017.

Dividends Paid are returns to shareholders of the company in the form of distribution of profits. It is essential to pay dividends to meet investor expectations.

The Dividends paid increase from $11.56 Million Billion to $12.77 Million Billion over a period of 3 years from 2015 to 2017.

However, the cash flow from operations is almost 5 times the value of dividends paid for the year 2017 and hence it can be deemed sufficient to pay the dividends for the year.

To determine

Concept Introduction:

Introduction:

Cash Flow Statements:

Cash flow statements are an integral part of the financial statements of a company. They reflect the direction and movement of the cash inflows and outflows during a reporting period. The cash inflows and outflows are segregated into the following activities:

Cash flows from Operating activities − The cash inflows refer to sales and income from operating activities and cash outflows include both cash and non-cash outflows from the operating activities i.e. the day to day activities of the business.

Cash flows from Investing activities − The cash inflows refer to sales and income from investing activities and cash outflows include cash outflows from the investing activities in the form of purchase of fixed assets and investments.

Cash flows from Financing activities − The cash inflows refer to income from financing activities such as raising share capital and debt and cash outflows include cash outflows from the financing activities in the form of dividends and interest paid.

There are two methods of preparing cash flow statements:

Direct Method − It measures the actual cash inflows and cash outflows that are affected during a particular reporting period. The actual cash flows do not include non-cash items and items that are recorded owing to the accrual principle.

Indirect Method −It measures the cash inflows and cash outflows that are affected during a particular reporting period including the non-cash items and items that are recorded owing to the accrual principle.

Requirement 4:

If amount paid to repurchase common stock was higher in 2017 as compared to 2016.

Expert Solution
Check Mark

Answer to Problem 1AA

The amount paid to repurchase common stock was higher in 2017 as compared to 2016 by almost 3 Billion.

Explanation of Solution

A clear reading of the financial statements indicates that the amount paid to repurchase common stock in the year 2017 was $ 32.90 Billion Million and the corresponding figure of the amount paid to repurchase common stock in the year 2016 was $ 29.72 Billion Million.

Repurchase of common stock, also known as buyback of stock, is a method of purchase of shares outstanding of a company with a view to control ownership, distribute surplus cash reserves and in general protect a company from hostile takeovers and other management decisions related to control.

A company may repurchase common stock with a view to retain the controlling interest and avoid control issue-based concerns. The repurchase of common stock forms part of the financing activities of the cash flow statement.

Financing activities are concerned with the acquisition and disposal of funds in the forms of equity and debt during a reporting period. They are concerned with the changes in non-current liabilities of the business.

Hence, it is determined if the amount paid to repurchase common stock was higher in 2017 as compared to 2016.

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Chapter 16 Solutions

FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS

Ch. 16 - Prob. 11DQCh. 16 - Prob. 12DQCh. 16 - Prob. 13DQCh. 16 - Prob. 14DQCh. 16 - Prob. 15DQCh. 16 - Transaction classification by activity C1 Classify...Ch. 16 - Prob. 2QSCh. 16 - QS 16-3 Indirect: Computing cash flows from...Ch. 16 - QS 16-4 Indirect: Computing cash flows from...Ch. 16 - QS 16-5 Indirect: Computing cash flows from...Ch. 16 - QS 16-6 Indirect: Computing cash from operations...Ch. 16 - QS 16-7 Indirect: Computing cash from operations...Ch. 16 - QS 16-8 Computing cash from asset sales P3 The...Ch. 16 - Prob. 9QSCh. 16 - QS 16-10 Computing investing cash flows P3 The...Ch. 16 - QS 16-11 Computing investing cash flows P3 Refer...Ch. 16 - Computing cash flows flow investing P3 Compute...Ch. 16 - QS 16-13 Computing cash from asset sales P3 Q...Ch. 16 - QS 16-14 Computing financing cash flows...Ch. 16 - Prob. 15QSCh. 16 - Prob. 16QSCh. 16 - Prob. 17QSCh. 16 - QS 16-18 Indirect: Preparing statement of cash...Ch. 16 - Ma rice la Yahtzee Cluedu Cash provided (used) by...Ch. 16 - QS 16-20A Recording entries in a spreadsheet P4 A...Ch. 16 - QS 16-21B Direct: Computing cash receipts from...Ch. 16 - QS 16-22B Direct: Computing cash payments to...Ch. 16 - QS 16-23B Direct: Computing cash paid for...Ch. 16 - Prob. 24QSCh. 16 - Prob. 25QSCh. 16 - Prob. 26QSCh. 16 - Prob. 27QSCh. 16 - Prob. 1ECh. 16 - Prob. 2ECh. 16 - Exercise 16-3 Indirect: Reporting and interpreting...Ch. 16 - Exercise 16-4 Indirect: Cash flows from operating...Ch. 16 - Exercise 16-5 Indirect: Cash flows from operating...Ch. 16 - Exercise 16-6 Indirect: Cash flows from operating...Ch. 16 - Exercise 16-7 Indirect: Reporting cash flows from...Ch. 16 - Prob. 8ECh. 16 - Exercise 16-8 Cash flows from financing...Ch. 16 - Exercise 16-10 Reconstructed entries P3 For each...Ch. 16 - Exercise 16-11 Indirect: Preparing statement of...Ch. 16 - Exercise 16-12 Indirect: Preparing statement of...Ch. 16 - Exercise 16-13 Analyzing cash flow on total assets...Ch. 16 - Exercise 16-14A Indirect: Cash flows spreadsheet...Ch. 16 - Exercise 16-14 Direct Cash flow...Ch. 16 - Exercise 16-16BDirect: Computing cash flows P5 For...Ch. 16 - Exercise 16-17B Direct: Preparing statement of...Ch. 16 - Prob. 18ECh. 16 - Prob. 19ECh. 16 - Prob. 20ECh. 16 - Prob. 1APSACh. 16 - Prob. 2APSACh. 16 - Prob. 3APSACh. 16 - Prob. 4APSACh. 16 - Prob. 5APSACh. 16 - Prob. 6APSACh. 16 - Prob. 7APSACh. 16 - Prob. 8APSACh. 16 - Problem 16-1B Indirect Computing cash flows from...Ch. 16 - Prob. 2BPSBCh. 16 - Prob. 3BPSBCh. 16 - Prob. 4BPSBCh. 16 - Prob. 5BPSBCh. 16 - Prob. 6BPSBCh. 16 - Prob. 7BPSBCh. 16 - Problem 16-8BBDirect: Statement of cash flows P5...Ch. 16 - Prob. 16SPCh. 16 - Prob. 1AACh. 16 - Prob. 2AACh. 16 - Prob. 3AACh. 16 - Prob. 1BTNCh. 16 - Prob. 2BTNCh. 16 - BTN 16-3 Access the April 14. 2016. filing of the...Ch. 16 - BTN 16-6 Team members are to coordinate and...Ch. 16 - Prob. 5BTNCh. 16 - Prob. 6BTNCh. 16 - Prob. 7BTN
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