University:
California State University, Northridge
Course:
ACCT 230 | Introduction to Managerial Accounting
Academic year:

2024
Views:

84

Pages:

13
Author:

Jarrett Brock

The T-Account Approach to Preparing the Statement of Cash Flows 13-60 T-Account Approach: Statement of Cash Flows Ed's Pizza Hut Comparative Balance Sheet Account Balances Cash Accounts Receivable Inventory Land Equipment Accumulated Depr. Accounts Payable Salaries Payable Note Payable - Joe Doe Common Stock Retained Earnings 3/31/2009 3/31/2008 Change DR (CR) DR (CR) Incr. (Decr.) $ 71,000 $ 90,000 $ (19,000) 23,000 40,000 (17,000) 322,000 300,000 22,000 68,000 100,000 (32,000) 112,000 84,000 28,000 (45,000) (39,000) 6,000 (38,000) (27,000) 11,000 (9,000) (14,000) (5,000) (50,000) (50,000) (500,000) (450,000) 50,000 (4,000) (34,000) (30,000) $ - $ - 13-61 T-Account Approach: Statement of Cash Flows Additional Information:  There was a net loss for the year of $27,000.  Depreciation charges for the year were $6,000.  During the year, Ed sold land originally costing $32,000 for $32,000.  During the year, Ed purchased equipment for $28,000.  During the year, Ed paid dividends of $3,000 to the stockholders.  Ed issued $50,000 of common stock to settle the note due to Joe Doe. 13-62 T-Account Approach Here is a summary of the sources of cash for Ed’s Pizza Hut. Ed's Pizza Hut Sources of Cash Decrease in A/R $ Decrease in Land Increase in A/P Depreciation charges Total sources of cash $ 17,000 32,000 11,000 6,000 66,000 13-63 T-Account Approach Here is a summary of the uses of cash for Ed’s Pizza Hut. Ed's Pizza Hut Uses of Cash Net loss $ Increase in Inventory Decrease in Salaries Payable Increase in Equipment Dividends paid Total uses of cash $ 27,000 22,000 5,000 28,000 3,000 85,000 The net cash flow for Ed’s Pizza Hut is ($19,000): $66,000 in sources minus $85,000 in uses. 13-64 T- Account Approach Provided Cash 27,000 Net loss Used 3,000 Cash dividends paid 13-65 T-Account Approach Provided Decrease in accounts receivable Cash 17,000 Used 27,000 Net loss 22,000 Increase in inventory 3,000 Cash dividends paid 13-66 T-Account Approach Cash Provided Decrease in accounts receivable Used 17,000 27,000 Net loss 22,000 Increase in inventory Sale of land 32,000 3,000 Cash dividends paid 13-67 T-Account Approach Provided Decrease in accounts receivable Depreciation charges Proceeds from sale of land Cash Used 17,000 6,000 27,000 Net loss 22,000 Increase in inventory 32,000 28,000 Purchase of equipment 3,000 Cash dividends paid 13-68 T-Account Approach Provided Decrease in accounts receivable Depreciation charges Increase in accounts payable Proceeds from sale of land Cash Used 17,000 6,000 11,000 27,000 Net loss 22,000 Increase in inventory 5,000 Decrease in salaries payable 32,000 28,000 Purchase of equipment 3,000 Cash dividends paid 13-69 T-Account Approach What about the $50,000 issuance of common stock to settle the note payable to Joe Doe? No Effect in the Cash Account. However, this transactions would be disclosed in a supplemental schedule that accompanies the statement of cash flows. 13-70 T-Account Approach Cash Provided Decrease in accounts receivable Depreciation charges Increase in accounts payable 17,000 6,000 11,000 Proceeds from sale of land 32,000 27,000 22,000 5,000 20,000 28,000 3,000 19,000 Used Net loss Increase in inventory Decrease in salaries payable Net cash used in operations Purchase of equipment Cash dividends paid Net decrease in cash The net effect of these transactions on the cash account is as shown. Notice, the net decrease in cash is $19,000. 13-71 The Statement of Cash Flows Ed's Pizza Hut Statement of Cash Flows For the Period Ending 3/31/2009 Operating Activities Net Loss Add: Decrease in A/R Increase in A/P Increase in Depr. Charges Less: Increase in Inventory Decrease in Salaries Payable Net Cash Provided by Operating Activities Investing Activities Proceeds from sale of Land Purchase of equipment Net Cash Provided by Investing Activities Financing Activities Dividends paid Net change in cash Cash, beginning Cash, ending $ (27,000) 17,000 11,000 6,000 (22,000) (5,000) (20,000) 32,000 (28,000) 4,000 (3,000) (19,000) 90,000 $ 71,000 In addition, on the face of the statement or in a supplemental schedule, disclose the issuance of $50,000 of stock to a creditor, a noncash financing activity.