Professional Documents
Culture Documents
CH 13
CH 13
13-1
Chapter
13
Statement of
Cash Flows
Financial Accounting, IFRS Edition
Weygandt Kimmel Kieso
Slide
13-2
Study Objectives
1. Indicate the usefulness of the statement of cash flows.
2. Distinguish among operating, investing, and financing
activities.
3. Prepare a statement of cash flows using the indirect
method.
Slide
13-3
The Statement of
Cash Flows:
Usefulness and
Format
Preparing the
Statement of Cash
FlowsIndirect
Method
Usefulness
Classifications
Step 1: Operating
activities
Significant non-cash
activities
Format
Preparation
Indirect and direct
methods
Slide
13-4
Slide
13-5
Slide
13-6
Investing
Activities
Generally
Non-Current
Asset Items
Financing
Activities
Generally
Non-Current
Liability and
Equity Items
Slide
13-7
Illustration 13-1
Slide
13-8
Illustration 13-1
Slide
13-9
Slide
13-10
Slide
13-11
Direct Method
1. Operating activities.
2. Investing activities.
Indirect Method
3. Financing activities.
The cash flows from operating activities section always
appears first, followed by the investing and financing sections.
Slide
13-12
Slide
13-13
Classification
Slide
13-14
Financing
Financing
Investing
Operating
Operating
Slide
13-15
Slide
13-16
Illustration 13-4
Slide
13-17
Illustration 13-4
Slide
13-18
Slide
13-19
Indirect
Method
Slide
13-20
Preparing
the
Statement
of Cash
Flows
Indirect
Method
Illustration 13-5
Slide
13-21
Slide
13-22
Indirect
Method
Slide
13-23
Operating Activities
Question
Which is an example of a cash flow from an operating
activity?
a. Payment of cash to lenders for interest.
b. Receipt of cash from the sale of shares.
Slide
13-24
Operating Activities
Depreciation Expense
Although depreciation expense reduces net income, it does not
reduce cash.
Illustration 13-7
Slide
13-25
Operating Activities
Loss on Sale of Equipment
Because companies report as a source of cash in the investing
section.
Any gain on sale is deducted from net income in the
operating section.
Slide
13-26
Operating Activities
Loss on Sale of Equipment
Computer Services income statement reports a $3,000 loss on
the sale of equipment (book value $7,000, less $4,000 cash
received from sale of equipment).
Illustration 13-8
Slide
13-27
Operating Activities
Changes to Non-Cash Current Asset Accounts
When the Accounts Receivable balance decreases, cash
receipts are higher than revenue earned under the accrual
basis.
Illustration 13-9
Accounts Receivable
1/1/011
Balance
Revenues
12/31/11 Balance
30,000
507,000
20,000
Operating Activities
Changes to Non-Cash Current Asset Accounts
Illustration 13-10
145,000
9,000
3,000
Slide
13-29
10,000
$
167,000
Operating Activities
Changes to Non-Cash Current Asset Accounts
When the Inventory balance increases, the cost of
merchandise purchased exceeds the cost of goods sold.
Merchandise Inventory
1/1/11
Balance
Purchases
12/31/11 Balance
10,000
155,000
150,000
15,000
Operating Activities
Changes to Non-Cash Current Asset Accounts
Illustration 13-10
145,000
9,000
3,000
10,000
Increase in inventory
(5,000)
Slide
13-31
162,000
Operating Activities
Changes to Non-Cash Current Asset Accounts
When the Prepaid Expense balance increases
Cash paid for expenses is higher than expenses reported on
an accrual basis.
Slide
13-32
Operating Activities
Changes to Non-Cash Current Asset Accounts
Illustration 13-10
145,000
9,000
3,000
10,000
Increase in inventory
(5,000)
(4,000)
158,000
Operating Activities
Changes to Non-Cash Current Liability Accounts
When Accounts Payable increases
Company received more in goods than it actually paid for.
Increase is added to net income.
Slide
13-34
Operating Activities
Changes to Non-Cash Current Liability Accounts
Illustration 13-11
145,000
9,000
3,000
10,000
Increase in inventory
(5,000)
(4,000)
16,000
(2,000)
172,000
Slide
13-36
Illustration 13-12
1/1/11
Balance
Issued bonds
12/31/11 Balance
20,000
110,000
130,000
Bonds Payable
1/1/11
Slide
13-37
Balance
For land
20,000
110,000
12/31/11 Balance
130,000
Slide
13-38
Illustration 13-14
172,000
20,000
(29,000)
(9,000)
22,000
33,000
55,000
110,000
(120,000)
(25,000)
4,000
(141,000)
Balance
40,000
Office building 120,000
12/31/11 Balance
Slide
13-39
160,000
Slide
13-40
Illustration 13-14
172,000
20,000
(29,000)
(9,000)
22,000
33,000
55,000
110,000
(120,000)
(25,000)
4,000
(141,000)
Balance
Purchase
12/31/11 Balance
Journal
Entry
Slide
13-41
10,000
25,000
Equipment sold
8,000
27,000
Cash
Accumulated depreciation
Loss on sale of equipment
Equipment
4,000
1,000
3,000
8,000
Statement
of Cash
Flows
Indirect
Method
Illustration 13-14
Slide
13-42
145,000
9,000
3,000
10,000
(5,000)
(4,000)
16,000
(2,000)
172,000
(120,000)
(25,000)
4,000
(141,000)
20,000
(29,000)
(9,000)
22,000
33,000
55,000
Balance
Shares sold
12/31/11 Balance
Slide
13-43
50,000
20,000
70,000
Partial statement
Slide
13-44
172,000
20,000
(29,000)
(9,000)
22,000
33,000
55,000
110,000
(120,000)
(25,000)
4,000
(141,000)
29,000
Balance
Net income
12/31/11 Balance
Slide
13-45
48,000
145,000
164,000
Statement
of Cash
Flows
Indirect
Method
Step 3: Net
Change in
Cash
Slide
13-46
Illustration 13-14
145,000
9,000
3,000
10,000
(5,000)
(4,000)
16,000
(2,000)
172,000
(120,000)
(25,000)
4,000
(141,000)
20,000
(29,000)
(9,000)
22,000
33,000
55,000
Question
Which is an example of a cash flow from an investing
activity?
a. Receipt of cash from the issuance of bonds
payable.
b. Payment of cash to repurchase outstanding
shares.
c. Receipt of cash from the sale of equipment.
d. Payment of cash to suppliers for inventory.
Slide
13-47
Slide
13-48
Illustration 13-16
Slide
13-49
Presently, the FASB and the IASB are involved in a joint project on
the presentation and organization of information in the financial
statements. One interesting approach, revealed in a published
proposal from that project, is that in the future the income
of cash flows.
Slide
13-53
Appendix A
Illustration 13A-1
Slide
13-54
Preparing a Worksheet
1. Enter in the statement of financial position accounts section the
statement of financial position accounts and their beginning and
ending balances.
2. Enter in the reconciling columns of the worksheet the data that
explain the changes in the statement of financial position accounts
other than cash and their effects on the statement of cash flows.
3. Enter the cash line and at the bottom of the worksheet the increase
or decrease in cash. This entry should enable the totals of the
reconciling columns to be in agreement.
Slide
13-55
Using a Worksheet
to Prepare the
Statement of Cash
Flows-Indirect
Method
Slide
13-56
Illustration 13A-3
Completed worksheet
indirect method
Slide
13-57
Slide
13-58
Slide
13-59
Additional information:
1. In 2011, the company declared and paid a $32,000 cash dividend.
2. Bonds were issued at face value for $130,000 in cash.
3. Equipment costing $180,000 was purchased for cash.
4. Equipment costing $20,000 was sold for $17,000 cash when the book value of the
equipment was $18,000.
5. Ordinary shares of $60,000 were issued to acquire land.
Slide
13-60
Illustration 13B-5
Slide
13-61
Illustration 13B-7
Illustration 13B-9
Slide
13-62
Illustration 13B-11
Slide
13-63
Illustration 13B-13
Slide
13-64
Slide
13-65
Slide
13-66
Significant non-cash
investing and financing
transaction.
Financing activity.
Significant non-cash
investing and financing
transaction.
Step 3: Net
Change in
Cash
Illustration 13B-16
Slide
13-68
Copyright
Copyright 2011 John Wiley & Sons, Inc. All rights reserved.
Slide
13-69