Archive for the ‘Corporations’ Category
Cash Flow Statements?
Cash Flow Statements
The latest two Balance Sheets for ABC are given to you below:
All figure are £’million
Year to:
31.12.07
31..12.06
Notes (see below) £
£
£
£
£
£
Fixed assets
1
Cost
Acc Dep
NBV
Cost
Acc Dep
NBV
Buildings
200
50
150
100
20
80
Plant & machinery
100
50
50
100
30
70
300
100
200
200
50
150
Current assets
Stocks
2
1
15
Debtors
3
32
38
Bank
4
29
62
-
53
Current liabilities: due within one year
Creditors
5
15
10
Bank overdraft
6
-
12
Taxation
7
25
15
Dividends
8
12
6
(52)
(43)
Net current assets
9
10
10
210
160
Creditors: amounts due after more than one year
Long-term loans
10
(20)
(50)
Net Assets
190
110
Capital and Reserves
Shares
11
150
100
Profit and Loss Account
12
40
10
190
110
You also find out the following information:
a) the outstanding corporation tax liability of £15m and the proposed dividend of £6m which related to the year to 31.12.06 were both paid during 2007. No other tax or dividends were paid in 2007.
b) 20 machines, which had originally cost £15 million and on which accumulated depreciation of £10 million has been charged, were sold in 2007 for a loss on disposal of £3million.
Required:-
Ø fill in the missing parts (???) of the Pro-forma Cash Flow Statement for ABC for the year to 31.12.07.
Ø Write a Business Report to the directors of ABC, to explain what your Cash Flow Statement tells you about the performance of the company in 2007 and how this information is useful, in addition to that found in the Balance Sheet and profit and Loss Account.
ABC: Cash Flow Statement for the Year to 31.12.07.
Notes
£
£
Operating profit
12
67
Depreciation for 2007
14
???
Loss on disposal of fixed assets
13
3
Changes in stocks / inventories
15
14
Changes in debtors / receivables
???
Changes in creditors / payables
???
???
Net cash flow from operating activities
???
Taxation paid this year
(???)
Investing activities
Payments to acquire fixed assets
(???)
Receipts from sale of fixed assets
13
???
(???)
Financing activities
Issue of shares / stock
???
Repayment of loan
(???)
Dividends paid this year
(???)
???
Change in cash over the year
16
???
(between the Balance Sheets)
Notes to Assist You J
The fixed asset entries for the two years show 3 things: the original cost, the accumulated depreciation (or total charged to date since the assets were bought) and their Net Book Value (NBV) = Cost – Accumulated depreciation at the Balance Sheet dates.
Stocks are the same as inventories.
Debtors are the same as receivables
Look carefully at what has happened to the bank balance. How has this changed between 31.12.06 and 31.12.07?? The answer is not by £29m.
Creditors are the same as payables
This ties in with my note 4 above.
This is a bit nasty ((-: On 01.01.07 we owed £15m tax (from the 2006 Balance Sheet). During 2007 we are told that we paid this £15m tax. At the end of 2007 we still have £25m outstanding tax to pay. So this must be the amount that was charged as an expense in the 2007 Profit and Loss Account, to get down to the £30m retained profit (see 12 below).
The same applies to the dividends. The £6m from 2006 was the only dividend paid during 2007 and £12m remains outstanding at 31.12.07. So this £12m was also deducted in the 2007 Profit and Loss Account.
Net current assets are the same as working capital.
These are sometimes called bonds or debentures.
These are stocks in the US.
N.B. These figures £(40 and 10) m represent the retained profits or reserves of the firm at each balance sheet date; the totals they have
Elvie Coklow
Cash Flow Statement Questions (3)?
Changes in the balance sheet accounts for My Two Sons Company from 6/30/Year 6 to 6/30/Year 7 are presented below:
Cash $40,000
Accounts Receivable $100,000
Inventory $150,000
Long-Term Investments $100,000
Long-lived assets $(100,000)
Accumulated depreciation $(30,000)
Accounts Payable $(20,000)
Mortgage Payable $(100,000)
Bonds Payable $200,000
Common stock, $1 par $150,000
Additional paid-in capital $50,000
Retained earnings $40,000
Additional information for Year 7:
The bonds were issued for cash at face value.
Net income was $240,000.
Dividends of $200,000 were declared and paid.
Common stock was issued for cash.
A long-term investment was sold for $80,000 with no gain or loss.
A new long-term investment was purchased for $180,000.
Long-lived assets that cost $300,000 were sold for $100,000. The book value of those assets was $75,000 at the time of sale.
New long-lived assets were purchased for cash.
——————————————————————————–
1. Refer to Exhibit 5-2. The net cash flow from operations for Year 7 is a __________. (Hint: Analyze the change in accumulated depreciation to determine the depreciation expense for the year.) (Points: 5)
$100,000 inflow
$100,000 outflow
$140,000 inflow
$140,000 outflow
2. Refer to Exhibit 5-2. The net cash flow from investing activities for Year 7 is a __________. (Points: 5)
$200,000 inflow
$200,000 outflow
$300,000 inflow
$300,000 outflow
3. Refer to Exhibit 5-2. The net cash flow from financing activities for Year 7 is a __________. (Points: 5)
$100,000 inflow
$100,000 outflow
$200,000 inflow
$200,000 outflow
Milo Bolander
Cash flow statement help plss?
Upshaw Corporation prepared the tabulation below for the current year.
Net Income ……………………………………………………..$400,000
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization expense, $35,000 ……………………………._____________
Increase in accounts receivable, $80,000……………….._____________
Decrease in inventory, $13,000 …………………………. ______________
Loss on sale of equipment, $4,000……………………..______________
Increase in accounts payable, $5,600 …………………______________
Decrease in interest receivable, $4,000 ………………_______________
Increase in prepaid expenses, $6,000 ……………….._______________
Decrease in income taxes payable, $1,500 …………._______________
Gain on sale of land, $5,000 ……………………………._______________
Net cash provided (used) by operating activities ……..______________
Instructions
Show how each item should be reported in the cash flow statement and the total cash provided (used) by operating activities prepared using the indirect method. Use parentheses for deductions.
Scott Blain
Operating Cash Flow Question?
A project generates revenues of $6000 before taxes, expenses before taxes of $3000, and depreciation charges of $1000 this year. The firm’s tax bracket is 34%. Taxes are due like sales taxes: immediately. Their cost of capital is 10 percent. Find the operating cash flow of the project for a typical year.
A. $1940
B. $2320
C. $1320
D. $3640
Jerald Pembrook
Multiple choice From cash flow statement?
1.The information in a cash flow statement will help users assess all of the following except
a.the company’s ability to generate future cash flows.
b.the company’s ability to pay dividends and meet obligations.
c.the company’s ability to turn over its accounts receivable.
d.the reasons for the difference between net income and cash provided or used by operating activities.
2.Which of the following characteristics does not apply to cash equivalents?
a.Short-term
b.Highly-liquid
c.Readily convertible into cash
d.Highly sensitive to interest rate changes
3.The acquisition of land by issuing common shares is
a.a noncash transaction which is not reported in the body of a cash flow statement.
b.a cash transaction and would be reported in the body of a cash flow statement.
c.a noncash transaction and would be reported in the body of a cash flow statement.
d.only reported if the cash flow statement is prepared using the direct method.
4.All of the following are examples of significant noncash activities except
a.the issue of common shares to purchase an asset.
b.the write-off of an uncollectible account receivable.
c.the issue of debt to purchase an asset.
d.the conversion of bonds into common shares.
5.In preparing a cash flow statement, a conversion of bonds into common shares will be reported in
a.the financing section.
b.the “extraordinary” section.
c.a separate schedule or note to the financial statements.
d.the shareholders’ equity section.
6.Potter Limited reported a net loss of $10,000 for the year ended December 31, 2007. During the year, accounts receivable decreased $5,000, merchandise inventory increased $8,000, accounts payable increased by $10,000, and amortization expense of $5,000 was recorded. During 2007, operating activities
a.used net cash of $2,000.
b.used net cash of $8,000.
c.provided net cash of $2,000.
d.provided net cash of $8,000.
7.Which of the following would not be an adjustment to net income using the indirect method?
a.Amortization expense
b.An increase in prepaid insurance
c.An increase in inventories
d.An increase in land
8.Using the indirect method, if equipment is sold at a gain, the
a.sale proceeds received are deducted in the operating activities section.
b.sale proceeds received are added in the operating activities section.
c.amount of the gain is added in the operating activities section.
d.amount of the gain is deducted in the operating activities section.
9.The loss on the sale of equipment will
a.be added to net income in the operating section of the cash flow statement.
b.be deducted from net income in the operating section of the cash flow statement.
c.be shown as a cash outflow from investing activities.
d.not be included in the cash flow statement as it is a noncash charge.
10.Stapp Corp. had an increase in inventory of $40,000. The cost of goods sold was $90,000. There was a $5,000 decrease in accounts payable from the prior period. What were Stapp’s cash payments to suppliers?
a.$135,000.
b.$85,000.
c.$125,000.
d.$95,000.
Rolanda Sigel
What is an Amortized discount and how does it affect cash flows?
Would an amortized discount add or subtract from the cash flow statement?
Lavern Ripson
Income Statement and Cash Flow Statement?
Cash flow statement contain “Operating Section” which is like the Income statement so why we still have to make a separate Income statement!!
Tom Sainz
Consolidated Statement of Cash Flow?
Parent company buys Subsidiary and merges into one. When preparing Statement of Cash Flow, I have Trading Securities Portfolio (at market) increase by $15,000. The additional information is that no trading securities were sold nor were any investments added to the portfolio. How can I treat with it? Will it appear on the operating section or investing section, or financing? I keep reading the book but the concept is too limitted.
Is there any body has some idea about it? I need help badly.
Thanks
Shauna Polidoro
In recent years, several manufacturing companies have reported the cash flow from?
In recent years, several manufacturing companies have reported the cash flow from the sale of Treasury securities in the cash from operations section of the statement of cash flows. What is the problem with this practice? Is there any situation in which this practice would be acceptable?
Tyler Blanchfield
Purchase Equipment by signing promissory note, what type of cash flow is this?
And is it outflow or inflow or niether?
David Keitt