University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

269

Pages:

2
Author:

stud_ice13

Completing these exercises involves preparing the various sections of a cash flow statement using both the indirect and direct methods, computing cash flows from operating, investing, and financing activities, and creating journal entries based on provided financial information. I'll outline an approach to solve these: 1. Classifying Cash Flows (12-1 & 12-17B): To classify items, you’ll need to decide if each item belongs in operating, investing, or financing activities. Generally: o Operating includes adjustments to net income, like changes in working capital (accounts receivable, inventory) and non-cash expenses (depreciation). o Investing relates to the purchase or sale of assets (property, plant, equipment). o Financing includes issuing stock, paying dividends, and debt-related activities. 2. Operating Cash Flows Using the Indirect Method (Exercises 12-2 through 12-8): o Start with net income. o Add back non-cash expenses like depreciation and amortization. o Adjust for changes in current assets and liabilities (e.g., increase in accounts receivable is subtracted, an increase in accounts payable is added). 3. Operating Cash Flows Using the Direct Method (Exercises 12-18B to 1220B): o Convert each income statement line into a cash equivalent (e.g., cash collected from customers). o Exclude non-cash expenses and directly report cash payments for operating expenses, such as payments to suppliers and employees. 4. Cash Flows from Investing and Financing Activities (12-9, 12-10): o Investing cash flows generally include asset purchases and sales (e.g., buying equipment, selling land). o Financing cash flows include cash from or paid to investors and creditors, such as issuing stock, paying dividends, or repaying loans. 5. Preparing a Full Statement of Cash Flows (Problems 12-12, 12-13, 1214): o Combine the operating, investing, and financing sections using either the indirect or direct method as specified. o Include a reconciliation of cash balances if required, showing beginning and ending cash. 6. Calculating and Analyzing Ratios (Exercises 12-15, 12-16A): o Compute cash flow on total assets ratio as net cash flow from operations divided by average total assets. 7. Preparing Cash Flow Spreadsheets (Exercises 12-16A, 12-7AA, and 127BA): o These help organize the changes in balance sheet accounts and associate them with specific cash flow activities. Would you like step-by-step assistance on a specific problem or section from this list?