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Cash Flows by Activity

Transaction
Sell shares
Legal Fees
Buy Bldg. & Land
Bldg. Renovations
Buy Metal Det.
Buy Software
Buy Advertising
Loan to Park
Pay Supplier
Pay Dividends
Rental prepayment
Met Det revenues
Buy Inventory
Sundries sales
Pay Salaries

Operating Investing Financing


250,000
(3,900)
(155,000)
124,000
(33,000)
(120,000)
(2,100)
(8,000)
(5,000)
(2,000)
(2,500)
1,200
120,100
(38,000)
35,000
(82,000)
17,400 (310,100)
371,500

KNOWLEDGE FOR ACTION

Relic Spotter Income Statement


Year ended 12/31/2012
Total Revenue

159,400

Met Det Depreciation Exp.


Software Amortization
Cost of Goods Sold
Total Costs of Revenue
Gross Profit

(30,000)
(350)
(30,000)
(60,350)
99,050

Salaries and Wages


Legal Fees
Advertising
Bldg. Depreciation
Total SG&A Expenses
Operating Income

(82,000)
(3,900)
(4,000)
(1,500)
(91,400)
7,650

Interest Revenue
Interest Expense
Pre-tax income
Income Tax Expense
Net Income

250
(4,900)
3,000
(630)
2,370

KNOWLEDGE FOR ACTION

Relic Spotter Balance Sheet


Assets
Cash
Accounts Receivable
Notes Receivable
Interest Receivable
Inventory
Prepaid Advertising
Total Current Assets

12/31/2012
78,800
4,200
5,000
250
12,000
4,000
104,250

12/31/2011
0
0
0
0
0
0
0

Land
Buildings
Metal Detectors
Less Accum Depr
Net PP&E
Software

103,000
85,000
120,000
(31,500)
276,500
1,750

Total Assets

382,500

KNOWLEDGE FOR ACTION

Liabilities and Owners' Equity


Accounts Payable
Interest Payable
Income Taxes Payable
Unearned Rental Revenue
Total Current Liabilities

12/31/2012 12/31/2011
2,000
0
4,900
0
630
0
1,100
0
8,630
0

Mortgage Payable
Total Liabilities

124,000
132,630

0
0

0
0
0
0
0
0

Common Stock
Additional Paid-in-Capital
Retained Earnings
Total Shareholders' Equity

25,000
225,000
(130)
249,870

0
0
0
0

Total Liab and Equity

382,500

Direct Method: Investing Activities


Transaction
Investing
Sell shares
Legal Fees
Buy Bldg. & Land
(155,000)
Bldg. Renovations
(33,000)
Buy Metal Det.
(120,000)
Buy Software
(2,100)
Buy Advertising
Loan to Park
Pay Supplier
Pay Dividends
Rental prepayment
Met Det revenues
Buy Inventory
Sundries sales
Pay Salaries
(310,100)

KNOWLEDGE FOR ACTION

Cash Flow from Investing Activities


Purchase of land
Purchase of buildings
Purchase of metal detectors
Purchase of software
Net Cash from Investing Activities

(103,000)
(85,000)
(120,000)
(2,100)
(310,100)

Direct Method: Financing Activities


Transaction
Sell shares
Legal Fees
Buy Bldg. & Land
Bldg. Renovations
Buy Metal Det.
Buy Software
Buy Advertising
Loan to Park
Pay Supplier
Pay Dividends
Rental prepayment
Met Det revenues
Buy Inventory
Sundries sales
Pay Salaries

Financing
250,000
124,000

(2,500)

371,500

KNOWLEDGE FOR ACTION

Cash Flow from Financing Activities


Payment of Dividends
Proceeds from Sale of Stock
Proceeds from Mortgage Payable
Net Cash from Financing Activities

(2,500)
250,000
124,000
371,500

Direct Method: Operating Activities


Transaction
Sell shares
Legal Fees
Buy Bldg. & Land
Bldg. Renovations
Buy Metal Det.
Buy Software
Buy Advertising
Loan to Park
Pay Supplier
Pay Dividends
Rental prepayment
Met Det revenues
Buy Inventory
Sundries sales
Pay Salaries

Operating
(3,900)

(8,000)
(5,000)
(2,000)
1,200
120,100
(38,000)
35,000
(82,000)
17,400

KNOWLEDGE FOR ACTION

Cash Flow from Operating Activities


Cash Collected from Customers
Cash Paid to Suppliers
Cash Paid to Employees
Cash Paid for Short-term Loans
Cash Paid for Miscellaneous Expenses
Net Cash from Operations

156,300
(40,000)
(82,000)
(5,000)
(11,900)
17,400

Indirect Method
Start with Net Income
Adjust for components of Net Income tied to noncash items or to
investing activities
Add back expenses or subtract revenues
Noncash items: Depreciation, amortization
Investing activities: Gains/losses on sale of PP&E or investments

Adjust for components of Net Income tied to assets or liabilities


created through operating activities (i.e., working capital)
Add or subtract change in asset/liability account balance
Use the balance sheet equation to determine whether to add or subtract:

Cash + Noncash Assets = Liabilities + Owners Equity

KNOWLEDGE FOR ACTION

Indirect Method: Operating Activities


Assets
Cash
Accounts Receivable
Notes Receivable
Interest Receivable
Inventory
Prepaid Advertising
Total Current Assets

12/31/2012
78,800
4,200
5,000
250
12,000
4,000
104,250

Land
Buildings
Metal Detectors
Less Accum Depr
Net PP&E
Software

103,000
85,000
120,000
(31,500)
276,500
1,750

Total Assets

382,500

12/31/2011 Cash Flow from Operating Activities


0 Net Income
2,370
0 Adjustments to reconcile Net Income to Cash from Operations:
0
Depreciation & Amortization
31,850
0
(4,200)
0 Change in Accounts Receivable
(5,000)
0 Change in Notes Receivable
0 Change in Interest Receivable
(250)
Change in Inventory
(12,000)
0
Change in Prepaid Advertising
(4,000)
0
0
0
0
0
0

Net Cash from Operations

Cash + Noncash Assets = Liabilities + Owners Equity

KNOWLEDGE FOR ACTION

17,400

Indirect Method: Operating Activities


Liabilities and Owners' Equity
Accounts Payable
Interest Payable
Income Taxes Payable
Unearned Rental Revenue
Total Current Liabilities

12/31/12 12/31/11
2,000
0
4,900
0
630
0
1,100
0
8,630
0

Mortgage Payable
Total Liabilities

124,000
132,630

0
0

Common Stock
Additional Paid-in-Capital
Retained Earnings
Total Shareholders' Equity

25,000
225,000
(130)
249,870

0
0
0
0

Total Liab and Equity

382,500

Cash Flow from Operating Activities


Net Income

Adjustments to reconcile Net Income to Cash from Operations:


Depreciation & Amortization
31,850
Change in Accounts Receivable
(4,200)
Change in Notes Receivable
(5,000)
Change in Interest Receivable
(250)
Change in Inventory
(12,000)
Change in Prepaid Advertising
Change in Accounts Payable
Change in Interest Payable
Change in Income Taxes Payable
Change in Unearned Rental Revenue
Net Cash from Operations

Cash + Noncash Assets = Liabilities + Owners Equity

KNOWLEDGE FOR ACTION

2,370

(4,000)
2,000
4,900
630
1,100
17,400

Statement of Cash Flows


Cash Flow from Operating Activities
Net Income
2,370
Adjustments to reconcile Net Income to Cash from
Operations:
Depreciation & Amortization
31,850
Change in Accounts Receivable
(4,200)
Change in Notes Receivable
(5,000)
Change in Interest Receivable
(250)
Change in Inventory
(12,000)
Change in Prepaid Advertising
Change in Accounts Payable
Change in Interest Payable
Change in Income Taxes Payable
Change in Unearned Rental Revenue
Net Cash from Operations

KNOWLEDGE FOR ACTION

(4,000)
2,000
4,900
630
1,100
17,400

Cash Flow from Investing Activities


Purchase of land
Purchase of buildings
Purchase of metal detectors
Purchase of software
Net Cash from Investing Activities

(103,000)
(85,000)
(120,000)
(2,100)
(310,100)

Cash Flow from Financing Activities


Payment of Dividends
Proceeds from Sale of Stock
Proceeds from Mortgage Payable
Net Cash from Financing Activities
Net Change in Cash

(2,500)
250,000
124,000
371,500
78,800