Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077632991
Author: Wild
Publisher: MCG
Question
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Chapter 16, Problem 4BPSB
To determine

Spreadsheet for Cash Flow Statement:

Spreadsheet for cash flow statement is another technique of analyzing the cash flows from various activities in which changes in each item of Balance sheet (i.e. of assets or liabilities) will be reconciled with the items listed in cash flow statement. The normal cash flow statement is prepared and it is then reconciled through the spreadsheet to reflect the changes in the Balance sheet items.

To Determine: The Spreadsheet for Cash flows Statement analysis to be prepared.

Expert Solution & Answer
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Answer to Problem 4BPSB

Solution: TheSpreadsheet for Cash flow Statement analysis has been prepared as follows:

    <

    Spreadsheet for Statement of Cash Flows-Indirect Method

    for the year ending December31, 2015

    31-Dec

    Analysis of Changes

    31-Dec

    2014

    Debit

    Credit

    2015

    Balance Sheet-Debit Bal. Accounts

    Cash

    61550

    123450

    Accounts receivable

    80750

    d.

    3650

    77100

    Inventory

    250700

    e.

    10100

    240600

    Prepaid expense

    17000

    f.

    1900

    15100

    Equipment

    200000

    h.

    113250

    c.

    51000

    262250

    610000

    718500

    Balance Sheet-Credit Bal. Accounts

    Accumulated depreciation

    95000

    c.

    22850

    b.

    38600

    110750

    Accounts payable

    102000

    g.

    84250

    Short term Notes payable

    10000

    i.

    5000

    15000

    Long term Notes payable

    77500

    j.

    47500

    m.

    70000

    100000

    Common Stockk

    200000

    k.

    15000

    215000

    Paid in capital in excess of par

    0

    k.

    30000

    30000

    Retained earnings

    125500

    l.

    53600

    a.

    158100

    230000

    610000

    718500

    Statement of Cash flows:

    Operating Activities:

    Net income

    a.

    158100

    Depreciation

    b.

    38600

    Loss on Sale of equipment

    c.

    2100

    Decrease in Accounts receivable

    d.

    3650

    Decrease in Inventory

    e.

    10100

    Decrease in prepaid insurance

    f.

    1900

    Decrease in Accounts payable

    g.

    84250

    Investing Activities

    Sale of Equipment

    c.

    26050

    Purchase of Equipment

    h.

    43250

    Financing Activities

    Borrowings under Short term notes

    i.

    5000

    Repayment of Long term notes

    j.

    47500

    Issue of Common Stock

    k.

    45000

    Dividend paid

    l.

    53600

    Non Cash investing and Financing Activities

    Purchase of Equipment by issuing Long term notes

    m.

    70000

    h.

    70000

    543860

    543860

Explanation of Solution

The Analyses of Cash flow Statement has been done for each item activity wise as under:

Cash-flows from Operating Activities: The Various items reflecting in the cash flows from operating activities have been reconciled with the balance sheet as under:

*Net income taken in cash flows is from the changes in retained earnings in the balance sheet (other part of change in retained earnings is due to dividend paid which will be reconciled in financing activities)
*Depreciation is reconciled with the change in Accumulated depreciation Account.
*Loss on sale of equipment along with accumulated depreciation on sold assets and cash received on sold assets is reconciled with change in equipment account balance.
*Changes in Accounts receivable, Inventory, Prepaid expense and Accounts payable has been properly reconciled with balances in balance sheet.

Cash-flows from Investing Activities: The Various items of cash flows from investing activities have been reconciled withbalance sheet items as under:

*Total change in balance of equipment has been divided in two parts, one debit change due to purchase (which has been categorized as cash purchase and non-cash purchase through issue of long term notes.
*Other change is credit change due to assets sold(which is further divided in to accumulated depreciation on sold assets, cash received on sold assets and loss on sale of asset).

Cash-flows from financing Activities: The Various items in financing activities has been reconciled as under:

*Short term borrowings is reconciled with the change in balance in balance sheet.
*Repayment of long term notes has been made and this change along with non-cash acquisition of assets has been reconciled with the total change in long term notes payable.
*Issue of shares at above premium reflecting the changes in two accounts of balance sheet i.e. common stock and paid in capital above par.
*Dividend paid is second change in retained earnings as discussed initially along with the net income.

Non-Cash Investing and Financing activities: The one transaction of assets acquired by issuing long term notes payable has been reconciled as already been discussed.

Conclusion
To conclude, it can be said that cash flows statement shall be prepared taking in to consideration principles of each activities for division of transactions among activities.

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Chapter 16 Solutions

Fundamental Accounting Principles -Hardcover

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