财务会计英文版课后习题答案Ch13.docx

1、财务会计英文版课后习题答案Ch13CHAPTER 13DISCUSSION QUESTIONS1. The main purpose of a statement of cash flows is to provide information about the cash receipts and cash payments of an entity during a period of time. The statement of cash flows also explains the changes in the balance sheet accounts and the cash e

2、ffects of the accrual-basis amounts reported in the income statement. In addition to operating activities, it also provides information about an entitys investing and financing activities. This information should assist investors and creditors in assessing an entitys ability to generate positive fut

3、ure cash flows.2. Cash equivalents are short-term, highly liquid investments that can be converted easily and quickly to cash. Examples include U.S. Treasury bills, money market funds, and commercial paper. Cash equivalents are to be included as cash (i.e., added to cash) on a statement of cash flow

4、s.3. Cash flows from operating activities include those items that enter into the determination of net income. Examples are cash receipts from the sale of goods or services and from interest, and cash payments for inventory, wages, taxes, interest, etc.Cash flows from investing activities result fro

5、m transactions and events involving the purchase or sale of securities (other than trading securities), property, plant, and equipment, and other assets not generally held for resale, and the making and collecting of loans. Examples include the proceeds from the sale of equipment, the purchase of a

6、building, the sale of a business segment, the collection of the principal amount on a loan to another entity, and the purchase of another entitys equity securities (not held as trading securities).Cash flows from financing activities result from transactions and events whereby resources are obtained

7、 from or paid to owners (equity financing) and creditors (debt financing). Examples include cash received from the sale (issuance) of stock, cash received from a bank loan or by issuing bonds, dividend payments to stockholders, or cash used to repurchase an entitys own stock (treasury stock).4. Sign

8、ificant noncash investing and financing transactions are to be reported separately in a schedule below the statement of cash flows or in the notes to the financial statements. Because they do not involve cash, they should not be reported in the body of the statement itself.5. The process of converti

9、ng from accrual revenues to cash receipts involves adjusting the beginning and ending receivable balances. We use Sales Revenue and Accounts Receivable to illustrate the process. Sales revenue $100,000 + Beginning accounts receivable 50,000 Ending accounts receivable (40,000) = Cash received from cu

10、stomers $110,000 Alternatively, the decrease in the accounts receivable balance could be added to sales revenue to derive the $110,000 cash received from customers.6. By analyzing the income statement and comparative balance sheets, the following six-step process can be used to prepare a statement o

11、f cash flows. 1. Compute the change in cash and cash-equivalent accounts for the period of the statement (month, year, etc.). This is the amount that will reconcile the beginning and ending cash balances. 2. Convert the income statement from an accrual-basis to a cash-basis summary of operations by

12、(a) eliminating any expenses that do not involve cash (e.g., depreciation), (b) eliminating the effects of nonoperating activity items (e.g., gains or losses from the sale of long-term assets not held for resale), and (c) analyzing all noncash current operating accounts to report revenues and expens

13、es on a cash basis. 3. Analyze long-term assets to identify the cash flow effects from investing activities. 4. Analyze long-term debt and stockholders equity accounts to determine the cash flow effects from financing activities. 5. Prepare a formal statement of cash flows by classifying all cash in

14、flows and outflows according to operating, investing, and financing activities. The net cash flows for the period should be equal to the amount computed in step 1. The net cash flows for the period are added to the beginning cash balance to equal the ending cash balance. 6. Report any significant no

15、ncash investing or financial transactions in a narrative explanation or in a separate schedule to the statement of cash flows.7. The net cash flows provided by (used in) operating activities can be calculated by either the direct or the indirect method. The direct method reports all operating cash r

16、eceipts and payments. The difference is the net cash flows from operations. The indirect method reconciles net income, as reported on the income statement, with net cash flows from operations, as calculated on the cash flows statement. Thus, with the indirect method, accrual net income is converted

17、to a cash basis on the statement itself.8. Depreciation and similar noncash items should not be reported on a statement ofcash flows. The indirect method starts with net income. Because these items have been included in net income, they must be added to or subtracted from net income. With the direct

18、 method, they are simply ignored.9. Any significant noncash transactions (e.g., the purchase of a building or the retirement of long-term debt by issuing stock) should be reported in a narrative in the notes to the financial statements or in a separate schedule below the statement of cash flows. Als

19、o, if the direct method is used to report cash flows from operations, a note or schedule must be included that reconciles net income to net cash flows from operations. If the indirect method is used, disclosure must be made of the amounts of cash paid for interest and income taxes.10. Investors and

20、creditors might use a statement of cash flows to better assess the amounts, timing, and uncertainties of future cash flows. This knowledge can help them to notice a companys shifts in operating, investing, and financing policies. It provides answers to specific questions, such as: Why werent dividen

21、d payments larger? How was a new building financed? Why is the company short on cash when earnings have increased?PRACTICE EXERCISESPE 131 (LO2) Categories of Cash Inflows and OutflowsThe correct answer is A. Answers B, C, and D are the main categories of the statement of cash flows. Those activitie

22、s that might be classified as “earning activities” are presented mainly in the operating activities section of the statement of cash flows.PE 132 (LO2) Identifying Operating ActivitiesThe correct answer is B.a. This is an example of a financing activity.b. This is an example of an operating activity

23、.c. This is an example of an investing activity.d. This is an example of a financing activity.PE 133 (LO2) Identifying Investing ActivitiesThe correct answer is D.a. This is an example of an operating activity.b. This is an example of a financing activity.c. This is an example of an operating activi

24、ty.d. This is an example of an investing activity.PE 134 (LO2) Identifying Financing ActivitiesThe correct answer is B.a. This is an example of an investing activity.b. This is an example of a financing activity.c. This is an example of an operating activity.d. This is an example of an investing act

25、ivity.PE 135 (LO3) Computing Net Change in Cash for the PeriodThe ending cash balance is $243, as shown below:Cash provided by (used in): Operating activities $ 3,460 Investing activities (3,730) Financing activities 298Net increase in cash and cash equivalents $ 28Cash at beginning of year 215Cash

26、at end of year $ 243PE 136 (LO3) Computation of Cash from Operating ActivitiesCash provided by operating activities is $203, as shown below:Collections on account $ 4,286Payments for inventory (2,874)Payments for miscellaneous expenses (1,031)Payment for interest (43)Payment for taxes (135)Cash flow

27、s from operating activities $ 203Note: Payments to stockholders as dividends are financing activities and do not appear on the operating activities section of the statement of cash flows.PE 137 (LO3) Solving for Cash from Investing ActivitiesCash used in investing activities is ($221,665), as shown

28、below:Ending cash balance $ 13,405Less: Beginning cash balance (12,540)Change in cash account for the year $ 865Cash from (used in) operating activities $ 136,190Cash from (used in) financing activities 86,340Cash from (used in) investing activities (221,665)Change in cash account for the year $ 865

29、PE 138 (LO4) Using Accounts Receivable to Compute Cash CollectionsThe company collected $4,557 from its customers, as shown below: Sales on account $4,526 Add: Beginning accounts receivable 512 Less: Ending accounts receivable (481) Collections on account $4,557Another way to consider this problem i

30、s to make a T-account with the information provided and solve for the unknown, as shown below:Accounts ReceivableBeg. Bal.512Sales4,526Collections?End. Bal.481To reconcile the accounts receivable account, we can only assume that cash collections of $4,557 occurred.PE 139 (LO4) Identifying Noncash Fl

31、ow Items and Nonoperating Activity ItemsThe gain on sale of land ($540) would be subtracted from net income, and depreciation expense ($1,785) would be added back to net income when computing cash from operating activities. Gain on sale of land relates to investing activities (not operating activities), and depreciation expense is a noncash item.PE 1310 (LO4) Using Inventory and Accounts Payable to Compute Cash Paid for InventoryTo solve this problem, consider the following four T-accounts:InventoryAccounts PayableCost of Goods Sold 3,110 2,57636,843136,843136,715236,715236,5733 2,982