Tiểu luận môn kế toán quốc tế preparing and presentation of cash flow statement

UNIVERSITY OF ECONOMICS HO CHI MINH CITYPOSTGRADUATE EDUCATION INSTITUTE INTERNATIONAL ACCOUNTING TOPIC 6: PREPARING AND PRESENTATION OF CASH FLOW STATEMENT Instructor: Ph.D PHẠM QUA

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

POSTGRADUATE EDUCATION INSTITUTE

INTERNATIONAL ACCOUNTING

TOPIC 6: PREPARING AND PRESENTATION

OF CASH FLOW STATEMENT

Instructor: Ph.D PHẠM QUANG HUY

Ho Chi Minh City, July 2016

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

POSTGRADUATE EDUCATION INSTITUTE

INTERNATIONAL ACCOUNTING

TOPIC 6: PREPARING AND PRESENTATION

OF CASH FLOW STATEMENT

Ho Chi Minh City, July 2016

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Firstly, we would like to thank the university board that has created the best conditions for learning facilities, modern equipment to help the research process and completion of group assignments easier

We also grateful to the management of library staff that has created the best conditions for us to refer to the documentations, finding information from books and from the Internet systems

Especially, our deepest appreciation goes to Ph.D Phạm Quang Huy who has provided us the knowledge to do this homework

Sincerely,

Exercise No 18

The Balance sheet for December 31, 2016, December 31, 2017, and the Income statement for the year ended December 31, 2017, for Rocket Company follows

ROCKET COMPANY BALANCE SHEET

December 31, 2017 and 2016

31-Dec-17 31-Dec-16 Assets

Cash 25,000 20,000 Account receivables, net 60,000 70,000 Inventory 80,00

0

100,00

0 Land 50,000 50,000 Building and equipment 130,000 115,000 Accumulated depreciation (85,000) (70,000)

Liabilities and stockholder's equity

Account payable 30,00

0

35,00

0 Income tax payable 4,000 3,000 Wages payable 5,000 3,000 Current notes payable 50,00

0

60,00

0 Common stock 110,000 100,000 Retained earnings 61,00

0

84,00

0

Total liabilities and stockholder's equity 260,00 0 285,00 0

Cash payment for building and equipment 15,000

Cash paid for retirement of notes payable 10,000

Cash receive from issuance of stock 10,000

ROCKET COMPANY INCOME STATEMENT

For the year ended December 31, 2017

Sales 500,000

Less expenses:

Selling and administrative expenses (90,

000) Interest expense (5,000)

Total expense (425,000)

Income before taxes 75,000

Income tax expense (30,000)

Net income 45,

000

Note: Cash dividends of $68,000 were paid during 2017

a Prepare the statement of cashflow for 2017 (indirect approach)

STATEMENT OF CASHFLOW (INDIRECT METHOD) OF ROCKET

COMPANY FOR THE YEAR ENDED 31 DECEMBER 2017

Profit before tax/(loss) 01 75,000 Adjustments for:

Depreciation and amortisation 02 15,000

5,000

Operating profit/(loss) before adjustments to working capital 08

95,000

(Increase)/decrease in accounts receivable 09 10,000 (Increase)/decrease in inventory 10 20,000

Increase/(decrease) in accounts payable 11 (3,000)

Retirement allowance paid 13 (10,000) Corporate income tax paid 14 (29,000)

Cash generated from (used in) operating activities before

Cash flows from investing activities

Purchase of fixed assets and construction in progress 21 (15,000)

Net cash inflows/(outflows) from investing activities 30

(15,000) Cash flows from financing activities

Cash receive from issuance of stock 31 10,000 Dividend paid to Investors 32

(68,000)

Net cash inflows/(outflows) from financing activities 40 (58,000)

Cash and cash equivalents at beginning of the period/year 60 20,000 Effects of changes in foreign exchange rates 61 -

Cash and cash equivalents at end of the period/year 70 25,000

b Compute the ratio operating cashflow/current maturities of long term debt amd current notes payable

Operating cash flow 78,000

= = 1.56 Current mature of long term debt and current notes payable 50,000

c Comment on the statement of cash flows and ratio computed in (b)

Operating cash flow is positive with amount of 5.000 which the company have enough finance from mainly operating to support other activites

The biggest outflow is 65.000 from finance activity

 If A>1 : The company has resoures from operating activity to cover its debt

 If A<1 : The company does not have enough resoures from operating activity to cover its debt

=> In this case, because A=1.56>1, it means the company has finance ability for the company's operation

Exercise No 1 9

The Balance sheet for December 31, 2016, December 31, 2017, and the Income statement for the year ended December 31, 2017, for Hartman Company follows

HARTMAN COMPANY BALANCE SHEET

31-Dec-17 31-Dec-16 Assets

0

153,00

0 Receivables 159,000 117,000 Inventory 150,000 180,000 Prepaid expenses 18,000 27,000 Plant assets 1,260,000 1,050,000 Accumulated depreciation (450,00

0)

(375,00 0)

Patent 153,000 174,000

Liabilities and stockholder's equity

Account payable 153,00

0

168,00

0 Accrued liabilities 60,000 42,000 Mortage payable 450,00

- 0 Preferred stock 525,000 - Additional paid-in capital - preferred 120,000 - Common stock 600,00

0

600,00

0 Retained earnings 129,000 66,000

Total liabilities and stockholder's equity 1,587,00 0 1,326,00 0

HARTMAN COMPANY INCOME STATEMENT

For the year ended 31 December, 2017

Gross profit 891,000 Operating expenses (690,000) Net income 201,000

a Prepare a statement of cashflow (indirect method) for Hartman, Inc FY 31 Dec 17

STATEMENT OF CASHFLOW (INDIRECT METHOD) OF HARTMAN,

INC FOR THE YEAR ENDED 31 DECEMBER 2017

Profit before tax/(loss) 201,000 Adjustments for:

Depreciation and amortisation 96,000 Interest expense

-

Operating profit/(loss) before adjustments to working capital 297,000

(Increase)/decrease in accounts receivable

(42,000) (Increase)/decrease in inventory 30,000 Increase/(decrease) in accounts payable

3,000 Increase/(decrease) in prepaid expenses 9,000

Cash generated from (used in) operating activities before

Cash flows from investing activities

Purchase of fixed assets (210,000) Proceeds from disposal of fixed assets -

Net cash inflows/(outflows) from investing activities (

210,000) Cash flows from financing activities

Capital contributions 645,000 Dividend paid to Investors (138,000) Debt repayment (

450,000)

Net cash inflows/(outflows) from financing activities 57,000

144,000

Cash and cash equivalents at beginning of the period/year 153,000

Effects of changes in foreign exchange rates -

Cash and cash equivalents at end of the period/year

297,000

b Prepare a schedule of cash provided by operating activities using the direct method

117 ,000

1,980,0

00

(1,938,00

0)

1 59,000 168

,000

1,089,0

00

(1,104,00

0)

1 53,000

Cash receipts from customers 1,938,000 Cash paid to suppliers (1,074,000) Cash paid for other operating expenses (567,000)

Net cash from operating activities 297,0 00

COGS (690,000)

Adjust expenses not paid by cash:

- Depreciation 75,000

- Written off patent 21,000

- Prepaid has not allocated (18,000)

- Allocation 27,0

00

- Accrued at YE 60,000

- Revert during the year (42,000)

(567,00

0)

Exercise No 20

EUSEY, INC

Accounts receivable (64,000)

Allowance for doubtful accounts (14,000)

Inventory 217,200

Prepaid expenses 20,000

Long term investments (144,000)

Building 600,000

Machinery 100,000

Office equipment (28,000)

Acc Depre Building (24,000)

Acc Depre Machinery (20,000)

Acc Depre Office equipment 12,000

Liabilities and stockholder's equity

Account payable 183,200

Accrued liabilities (72,000)

Dividends payable (128,000)

Preminum on bonds (32,000)

Bonds payable (800,000)

Preferred stock ($50 par) 60,000

Common stock ($10 par) (156,000)

Additional paid-in capital - common (223,200)

Retained earnings 87,200

1

INCOME STATEMENT

For the year ended 31 Dec 17 Income before extraordinary item 272,000 Extraordinary loss: condemnation of land (132,000) Net income 140,000

2 Cash dividend of 128,000 were declared Dec 15, 2017; payable Jan 15, 2018

Cr Dividends payable 128,000

5% of stock dividend was issued Mar 31, 2017, when the market value was

$22.00 per share

No of dividend share as at 31 Mar 17 36,000 (from point 7, assume that owners of preferred stocks did not receive stock dividend)

Notes:

- Movement of No of stock during the year 15,600

- Selling of additional shares 12,000

=> Additional shares (stock dividend) 3,600

Check:

No of shares as at 31 Mar 16 72,000

5% stock dividend 3,600

Cr Common stock 36,000

Cr Additional paid-in capital – common 43,200

3 Long term investments were sold for 140,000

Dr Loss on sold long term investment 4,000

Cr Long term investment 144,000

4 Building and land

Cost 480,000

Book value 300,000

Selling price 400,000

Cost of the land 20,000

Dr Cash 400,000

Dr Acc Depr of building 180,000

Cr Building 460,000

Cr Gain on disposal of building and land 100,000

5 Entry was made to record an exchange of old machine for new one

Dr Accumulated Depreciation – Machinery 40,000

6 Fully depreciated copier machine which cost 28,000 was written off

Dr Acc depr of Copier machine 28,000

Cr Office equipment (Coppy Machine) 28,000

7 Preferred stock of $60,000 par value was redeemed for 80,000

Dr Preferred stock 60,000

Dr RE 20,000

Cr Cash 80,000

8 The company sold 120,000 shares of its common stock ($10 par) on June 15, 2017 for $25 a share There were 87,600 shares outstanding on December 31, 2017

Dr Cash 300,000

Cr Common stock 120,000

Cr Additional paid-in capital – common 180,000

9 Bonds were sold at 104% on December 31, 2017

Dr Cash 832,000

Cr Premium on Bonds 32,000

Cr Bonds Payable 800,000

10 Land that was condemned had a book value of 240,000

Dr Loss on land condemnation 132,000

Dr Cash 108,000

Cr Condemed land 240,000

STATEMENT OF CASHFLOW (INDIRECT METHOD) OF EUSEY, INC

FOR THE YEAR ENDED 31 DECEMBER 2017

Profit before tax/(loss) 140,000 Adjustments for:

Depreciation and amortisation 280,000 Decrease in provisions

14,000 Gain from disposal of land and building (100,000) Loss from disposal of long term investment 4,000 Loss on condemnation of land 132,000

Operating profit/(loss) before adjustments to working capital 470,000

(Increase)/decrease in accounts receivable

64,000 (Increase)/decrease in inventory (217,200) Increase/(decrease) in accounts payable (111,200) Increase/(decrease) in prepaid expenses (20,000)

Cash generated from (used in) operating activities before corporate

Cash flows from investing activities

Acquisition of machinery (140,000) Acquisition of land (

560,000) Acquisition of building (1,060,000) Proceeds from disposal of land and building 400,000 Proceeds from divestments in other entities 140,000 Proceeds from condemnation of land 108,000

Net cash inflows/(outflows) from investing activities (1,

112,000) Cash flows from financing activities

Proceeds from selling bond

832,000 Proceeds from common stock 300,000 Redeemed preferred stock (80,000) Dividend paid to Investors

-

Net cash inflows/(outflows) from financing activities 1, 052,000 Net increase/(decrease) in cash 125,600 Cash and cash equivalents at beginning of the period/year

Effects of changes in foreign exchange rates

- Cash and cash equivalents at end of the period/year 125,600