...Harvard Business School 9-193-103 os t Rev. November 3, 1998 rP Statements of Cash Flows: Three Examples yo John Stacey, a sales engineer for Aldhus Corporation, was worried. A flight delay had caused him to miss last week’s accounting class in the evening MBA program in which he had enrolled at the suggestion of the personnel director at Aldhus, a growing manufacturer of computer peripherals. The class he had missed had been devoted to a lecture and discussion of the statement of cash flows, and he was sure the material he had missed would be covered in the weekly quiz that was part of each class session. A classmate had faxed Stacey some notes distributed by their instructor, but they were too cryptic to be understood by anyone who had missed the class. In desperation, John called Lucille Barnes, the assistant controller at Aldhus, to ask if she could take a few minutes to point him in the right direction toward understanding the statement of cash flows. She seemed delighted by the request, and they agreed to meet that afternoon. op The Meeting No tC At 2:00 P.M. John Stacey went to the office of Lucille Barnes with his notes and questions. After they had exchanged greetings, Lucille handed John three cash flow statements from the annual reports of other high-technology companies (Exhibits 1, 2, and 3). John was worried that Lucille would ask him to explain them, and that she would see how confused he still was about some aspects ...
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...1998 Statements of Cash Flows: Three Examples John Stacey, a sales engineer for Aldhus Corporation, was worried. A flight delay had caused him to miss last week’s accounting class in the evening MBA program in which he had enrolled at the suggestion of the personnel director at Aldhus, a growing manufacturer of computer peripherals. The class he had missed had been devoted to a lecture and discussion of the statement of cash flows, and he was sure the material he had missed would be covered in the weekly quiz that was part of each class session. A classmate had faxed Stacey some notes distributed by their instructor, but they were too cryptic to be understood by anyone who had missed the class. In desperation, John called Lucille Barnes, the assistant controller at Aldhus, to ask if she could take a few minutes to point him in the right direction toward understanding the statement of cash flows. She seemed delighted by the request, and they agreed to meet that afternoon. The Meeting At 2:00 P.M. John Stacey went to the office of Lucille Barnes with his notes and questions. After they had exchanged greetings, Lucille handed John three cash flow statements from the annual reports of other high-technology companies (Exhibits 1, 2, and 3). John was worried that Lucille would ask him to explain them, and that she would see how confused he still was about some aspects of accounting; instead, Lucille began explaining. Lucille Barnes (Assistant Controller): The statement of cash...
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...Inc. Case 2 A. The statement of cash flows simply provides information on cash coming in and out of the company. The statement of cash flows consists of three different categories: operating, investing, and financing activities by the company that affected the cash flows. The main difference between The Statement of Cash Flows and The Income statement is accrual accounting. Accrual accounting is used when developing income statements because it records revenues and expenses when the transactions occur opposed to the Statement of Cash flows that records them when cash is exchanged. B. The two different methods for preparing income statements are direct and indirect. Weis Markets uses the indirect method, we know because the statement of cash flows starts with the net income. Using the indirect method companies start with the net income and make adjustments to non-cash transactions, then adjusts from all cash based transactions. Most companies use the indirect method because it is easier to reconcile accounts. C. The three sections of the statement of cash flows are operating activities, investing activities and financing activities. D. The three sections of statement of cash flows relate to the balance sheet because the changes in the balance sheet are what’s recorded in the statement of cash flows. E. Cash equivalents are assets/ securities that can be converted into cash. Some examples are short-term government bond, T-bills, and commercial paper. Cash equivalents...
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...MEMORANDUM FROM: TO: SUBJECT: Case 1, Buck’s Dilemma: Gross or Net? DATE: January 16, 2016 KEY FACTS Buck’s Hunting Equipment Inc. (“Buck”) is a retail business based in Pittsburgh, PA. During Buck’s expansion into West Virginia and southern Ohio, it entered into a three-year revolving line of credit (the “Facility”) with its bank on January 1, 2015. Specific facts and circumstances are as followed: • The line of credit has a maximum borrowing capacity of $100 million, and under the terms of the agreement, all draws are considered to be due on demand. • On July 15, 2015, Buck drew $60 million on the Facility. • On August 30, 2015, Buck drew an additional $40 million on the Facility. • On September 30, 2015, Buck paid down the draws by $50 million. • Assume the volume of transactions is considered to be large. PRIMARY ISSUES In Buck’s Statement of Cash Flows for the year ended December 31, 2015, should the borrowing and payment activity related to its revolving line of credit be presented as operating, investing, or financing activities? Under US GAAP, should the activities under Facility be presented on a net or gross basis on the statement of cash flows? How about under IFRS? ANALYSIS Operating, Investing, or Financing Buck should present the borrowing and payment activity related to its revolving line of credit as cash flows from financing activities. According to ASC 230-10-45-14, “all of the following are cash inflows from financing activities: … b. proceeds...
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...* * Cash Equivalents Cash equivalents are short-term, highly liquid investments that have both of the following characteristics: * a. Readily convertible to known amounts of cash * b. So near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less qualify under that definition. Original maturity means original maturity to the entity holding the investment. For example, both a three-month U.S. Treasury bill and a three-year U.S. Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations). Suggested Solution -- Case 01 Objectives of the Case This case gives students an opportunity to apply cash flow principles to determine the appropriate classification of various transactions in the statement of cash flows. Applicable Professional Pronouncements ASC 230, Statement of Cash Flows (ASC 230) IAS 7, Statement of Cash Flows (IAS 7) Discussion 1 — Purchase of 2012 Emission Allowances What is the appropriate classification in the statement of cash flows in Polluter Corp.’s (the ―Company’s‖)...
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...Warf Cash Flow Maureen Steinwall, PhD Walden University Warf Cash Flow This assignment is looking for the student to demonstrate competencies in cash flow analysis. The process of calculating cash flow is practiced; in addition, a critical thinking element is introduced. A successful assignment will present the cash flow calculations and discussion using APA formatting. Financial Statement of Cash Flows A financial statement of cash flows starts with the earnings before interest and taxes (EBIT). The analyst then adds back the noncash expenses such as depreciation, and deducts the cash needed for taxes providing a true view of the cash flow from operations. In this example, the cash from operations was $1,322,000 (see Figure 1). The analyst then moves to the balance sheet to observe where the cash was used. In this example, the company purchased assets totaling $810,000 reducing their available cash to $512,000 ($1,322 minus $810). Perhaps at this point the analyst is feeling like they are on a scavenger hunt tracing the path (or flow) the cash followed during the period under review. The final step is to review the change in the working capital requirements for cash. In this example, Warf needed cash to fund current assets such as receivables and inventory of $ 78,000. In addition, the company needed $92,000 to pay down current liabilities such as payables or current debt. The resulting cash flow is $342,000 positive from the period under review. ...
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...Case 13-02 Buck’s Dilemma: Gross or Net? Background Buck’s Hunting and Equipment Inc. (Buck) has determined that it’s time to expand their retail operations. Buck is planning to build several retail stores over the next three years. In order execute their plan, Buck entered into a $100 million, three-year revolving line of credit (the Facility) with their bank on January 1, 2010. Buck and his auditor and management would like to know how to book presentation of cash flows through the use of a revolving line of credit is whether to report the amounts borrowed and repaid on a net basis or on a gross basis. FASB’s Accounting Standards Codification 230-10-45-7 states “information about the gross amounts of cash receipts and cash payments during a period is more relevant than information about the net amounts of cash receipts and payments.” (FASB, ASC 230-10-45-7). However it is often enough to report the net amount of these cash receipts and payments. ASC 230-10-45-8 states that net presentation if appropriate when there is a quick turnover with large amounts and short maturities. Solution 1 — Classification with the Statement of Cash Flows Buck should present the borrowing and payment activity as a cash flow from financing activities. ASC 230-10-45-14 states that “proceeds from issuing bonds, mortgages, notes, and from other short- or long-term borrowing” are a cash inflow from financing activities. Similarly, ASC 230-10-45-15 states that “repayments of amounts...
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...alternatives and predict the attributes of firms that elect various accounting methods. Accounting theory should also be verifiable research. As stated in the Financial Accounting Theory and Analysis, the development of general theory of accounting is important because of the role accounting plays in our economic society, which is characterized by a self-regulated market that operates through the forces of supply and demand. The role of accounting is to report how organizations or companies use those scarce resources and on the status or resources and claims to resources. Because accountings have to report these organizations, the reports are done in a formal way called financial statements. The financial statements that are the main focused in this paper is the income statement, the balance sheet and the statement...
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...[pic] Financial Statement Analysis For Small Businesses A Resource Guide Provided By Virginia Small Business Development Center Network (Revised for the VSBDC by Henry Reeves 3/22/2011) Contents |Topic |Page | |Introduction |3 | |Importance of Financial Statements |4 | |Collecting and Managing Data |5 | |The Income Statement |7 | |The Balance Sheet |9 | |Reconciliation of Equity or Statement of Changes in Stockholder Equity |12 | |Statement of Cash Flows |12 | |Notes to Financial Statements |13 ...
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...Cash flow Cash flow is a revenue or expense stream that changes a cash account over a given period. It is one of the most important pieces of information that can be derived from financial statements. Cash flow is important because a positive net income on the income statement is ultimately insignificant unless a company can translate its earnings into cash, and the only source in financial statement data for learning about the generation of cash from operations is the statement of cash flows. Cash inflows usually arise from one of three activities, examples financing, operations or gifts in the case of personal finance. Cash inflow is things like customer receipts, dividends received and income tax refunds. Other example of cash inflow is proceeds from sales and casualty insurance proceeds. Also , proceeds from bond issuance and from loans. Statement of cash flows is an key financial statement in the accountancy industry. It was one of the four major financial statements needed by GAAP. The main purpose of statements of cash flows is to prepare relevant information on cash receipt and cash payment during a business. The statement shows why the cash in the period by reporting a net cash available or used by operating activities, investing activities, and financing activities. This paper discusses how to direct and indirect method of cash flow statement and will also discuss every part to get the cash flow statement and how it helped the various of different users...
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... |School of Business | | |ACC/230 (11/05/2012 – 01/20/2013) | | |Financial Reporting: Peeking Under the Financial Hood | Copyright © 2009, 2007 by University of Phoenix. All rights reserved. Course Description In this course, students will learn to analyze financial statements and methods used to value companies. Financial reports help managers choose between business paths. They also help investors and analysts evaluate the financial health of companies. This course is a practical means of discovering how financial data are generated and their limitations; techniques for analyzing the flow of business funds; and methods for selecting and interpreting financial ratios. It also presents analytical tools for predicting and testing assumptions about a firm’s performance. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the...
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...Introduction To The Income Statement This is the downloaded transcript of the video presentation for this topic. More downloads and videos are available at http://www.kgaction.com/financial-statement-analysis The Kaplan Group Commercial Collection Agency Superior Results Since 1991! www.kgaction.com! 805-541-2639 More Videos and downloads at © The Kaplan Group! http://www.kgaction.com/financial-statement-analysis © The Kaplan Group! The Kaplan Group | Introduction to The Income Statement Hi. This is Dean Kaplan. The Kaplan Group is a commercial collection agency specializing in debt collection of large business to business claims. CREDIT MANAGER SEMINARS This video series introducing you to financial statement analysis is based on the dozens of training seminars I have given to credit industry groups organized by Dun & Bradstreet, the National Association of Credit Management and Riemer Reporting Services. It is applicable to anyone wanting to learn about this topic, although on occasion I will highlight information from the perspective of credit management. 3 FINANCIAL STATEMENTS Cash Flow Statement For the Year Ended December 31, 2011 (000s) Cash Flows From Operating Activities Net Income 397 Depreciation and amortization 318 Unrealized gain on marketable securities Decrease (increase) in deferred taxes (12) Balance Sheet (44) As of December 31, 2011 (000s) Net increase (decrease)...
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...generate profit b) Brood stock (8 kg) - This is considered as non-current asset as it helps to generate more resources c) Farm - This is considered as property, plant & equipment d) Special effect concrete pond system - This is considered as property, plant & equipment e) Ozone processor -This is considered as property, plant & equipment f) Cash in hand - The owner's investment in the business g) Knowledge in the field - This is considered as asset too as the knowledge in rearing empurau will bring in more profit 3. Every year The company intends to invest RM1 million per year for the next three years and plough back its profit to fund expansion of the farm’s infrastructure. Is profit cash? Explain. What accounting information would be useful to help LTT management make such a decision? Answer: Using accounting equation for LTT Aquaculture's 3 years plan, these are transactions that could took place A = L + OE Year 1 + Initial Investment (RM 1 mil) + 200,000 Empurau + Capital (RM 1 mil) Year 2 + Additional Investment (RM 1 mil) + Farm & Equipment Expansion + 200,000 - 3000 (1.5kg Empurau sold) + Cash/Sales from 1.5 kg Empurau sold + Capital + Profit - Operating expenses - Feeding Year 3 + Additional Investment (RM 1 mil) + Farm & Equipment Expansion + 197,000 - 3000 (1.5 kg Empurau...
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...Accounting 305 Table of Contents Introduction………………………………………………………………………………………………………2 The firm’s auditors and their opinion on the financial statements……………………………………………….2 The subsequent events, errors and irregularities, illegal acts, or related-party transactions……………………...3 that have a material effect on the financial statements were none……………………………………………......3 The trend in total assets and total liabilities for the years presented…………………………………………...…3,4 The company’s three largest assets for the most recent year presented……………………………………….…..4 The company’s three largest liabilities for the most recent year presented……………………………………….4 The types of stock the company has and the outstanding shares for each type of stock for the most recent year presented………………………………………………………………………………...4 The company use of multiple-step income statement……………………………………………………………..5 The income statement with no discontinued operations or extraordinary items, in any year presented…………..5 The trend in net income over the years presented……………………………………………………………....….5 The company has no comprehensive income reported……………………………………………………………6 The company use of indirect cash-flow statement method………………………………………………………..6 The trend in cash from operations for the years presented…………………………………………………………6 The two largest items included in cash from investing activities…………………………………………………..7 Conclusion………………………………………………………………………………………………………….8 Costco Wholesale Corporation originated in...
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...Case: Beverly, Inc. Beverly, Inc. creates and sells a range of mobile network products and systems and communication devices. These include mobile, cordless, and corded telephones. The main operation company is based out of Los Angeles, CA. However, they sell products in nearby cities and all around Southern California. Beverly wants to expand and open a series of new stores over the next three years. To achieve their goal, Beverly decides to take a three-year revolving line of credit with its bank on January 1, 2010. The maximum Beverly can borrow is $100 million. With the new line of credit, Beverly has a new set of problems to address using ASC 230. First, it must decide on where to put the borrowing and payment activity on the statement of cash flows. Beverly must also decide on whether to present various activates as either net or gross basis for the year ending December 31, 2010. These activities include all draws of the line of credit are to be due on demand, a draw of $60 million on July 15, 2010, another draw of $40 million on August 30, 2010, a payment of $50 million on September 30, 2010, and for Beverly to assume that the volume of transactions is considered to be large. Beverly had a disaster in one of its sale offices in the Gulf Coast Region. Hurricane William damaged the warehouse and Beverly had to rent temporary office space in Houston. Beverly filed an insurance claim and received $15 million from its insurance carrier. It decided to use those proceeds to...
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