Excel Applications for Accounting Principles

Business

Quiz 14 :
Statement of Cash Flows Cashflow

Quiz 14 :
Statement of Cash Flows Cashflow

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PROBLEM DATA The comparative balance sheet of Prime Sports Gear, Inc., at December 31, the end of the fiscal year, is as follows: img Additional data obtained from the records of Prime Sports Gear are as follows: a. Net income for 2013 was $121,610. b. Depreciation reported on income statement for 2013 was $46,500. c. Purchased $165,000 of new equipment, putting $90,000 cash down and issuing $75,000 of bonds for the balance. d. Old equipment originally costing $19,500, with accumulated depreciation of $7,950, was sold for $8,000. e. Retired $60,000 of bonds. f. Declared cash dividends of $64,000. g. Issued 1,500 shares of common stock at $27 cash per share. REQUIREMENT You have been asked to prepare a statement of cash flows for Prime Sports Gear for 2013. Review the worksheet called CASHFLOW that has been provided to assist you in preparing the statement. The worksheet has been designed so that as you make entries in columns D and F, column G will be automatically updated. For example, FORMULA1 should be entered as =B17+D17 - F17. Columns C and E are to be used to enter letter references for each of the debit and credit entries on the worksheet.
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Table showing worksheet for statement of cash flow for Company P:
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PROBLEM DATA The comparative balance sheet of Prime Sports Gear, Inc., at December 31, the end of the fiscal year, is as follows: img Additional data obtained from the records of Prime Sports Gear are as follows: a. Net income for 2013 was $121,610. b. Depreciation reported on income statement for 2013 was $46,500. c. Purchased $165,000 of new equipment, putting $90,000 cash down and issuing $75,000 of bonds for the balance. d. Old equipment originally costing $19,500, with accumulated depreciation of $7,950, was sold for $8,000. e. Retired $60,000 of bonds. f. Declared cash dividends of $64,000. g. Issued 1,500 shares of common stock at $27 cash per share. REQUIREMENT Open the file CASHFLOW from the website for this book at cengagebrain.com. First, enter the formulas. Then, complete the worksheet in the manner described next. According to the problem, cash increased from $39,600 to $67,210 during the year. This is a $27,610 increase. To record this increase on the worksheet, move to row 17. Since this is the first account you are analyzing, enter the letter a in column C. Then enter 27610 in column D (a debit since cash increased). This brings the year-end balance (column G) to $67,210, its proper balance. Now move to the bottom part of the statement where you see the categories Operating Activities, Investing Activities, and so on. The credit side of the entry has to be entered here. The proper space for this cash entry is on row 59. Enter the letter a in cell E59 and 27610 in cell F59. Notice the totals at the bottom of the page (row 60) now agree. The next account balance that changed is accounts receivable. It increased by $9,035. To enter this change on the worksheet, enter the letter b in cell C18 and 9035 in cell D18 (again, a debit since accounts receivable increased). This brings the year-end balance in column G to $121,250, its proper balance. The change in accounts receivable balance is an operating activity adjustment (as explained in your textbook). Enter the credit side of this entry in cells E34 and F34, and enter the explanation Increase in accounts receivable in cell A34. Note: Your textbook probably shows "Net income" as the first item under Operating Activities. We will get to that later. The sequence in which you enter items on this worksheet is not important. All other balance sheet accounts must be analyzed in the same manner, placing appropriate debit or credit entries in the top part of the worksheet to obtain the proper balances in column G, and then entering the second side of the entry in the appropriate row on the bottom part of the worksheet. You should use letter references to identify all entries. Also, you must enter a description of the entry in column A under the appropriate activity category. Although a sequence of analyzing the balance sheet from top to bottom is suggested here, this order is not necessary. As mentioned earlier, your textbook may specify a different sequence. Also, note that some accounts may have both debit and credit adjustments to them. The worksheet is not a substitute for a statement of cash flows, but it does provide you with all the numbers you need to properly prepare one. You will be done with your analysis when: a. The individual account balances at December 31, 2013, as shown on the worksheet (column G) equal those shown in the given problem data. b. The transaction column totals are equal (cells D60 and F60). c. The sum of the operating, investing, and financing activities (cell G59) equals the change in cash (cell D59 or F59). When you are finished, enter your name in cell A1. Save your completed file as CASHFLOW2. Print the worksheet when done. Also print your formulas. Check figure: Total credits at 12/31/2013 (cell G31), $860,460.
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In general, for debit accounts, the formula to find the ending account balance is beginning balance plus any debits less any credits. For credit accounts, the formula to find the ending account balance is beginning balance less debits plus credits.
Prepare the worksheet showing analysis of transactions as follows:
img Record the corresponding entry under operating activities, investing activities, or financing activities and indicate each transaction with a letter.
Prepare the worksheet showing analysis of transactions as follows:
img Prepare the statement of cash flows as follows:
img Here, debit and credit balances are equal. The change in cash flow from (a) matches the summary of transactions total. In addition, the transaction debits and credits are equal as well. This means that the worksheet is balanced.
Prepare the cash flow statement considering the two errors made, as follows:
img img Hence, the change in cash has reduced to $ 7,610

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PROBLEM DATA The comparative balance sheet of Prime Sports Gear, Inc., at December 31, the end of the fiscal year, is as follows: img Additional data obtained from the records of Prime Sports Gear are as follows: a. Net income for 2013 was $121,610. b. Depreciation reported on income statement for 2013 was $46,500. c. Purchased $165,000 of new equipment, putting $90,000 cash down and issuing $75,000 of bonds for the balance. d. Old equipment originally costing $19,500, with accumulated depreciation of $7,950, was sold for $8,000. e. Retired $60,000 of bonds. f. Declared cash dividends of $64,000. g. Issued 1,500 shares of common stock at $27 cash per share. REQUIREMENT In the space provided on the next page, prepare a statement of cash flows in good form using the indirect method. Use the format shown in your textbook.
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A company prepares a statement of cash flows to clearly indicate how cash flows during a fiscal period. This statement shows three main categories that uncover information about operating activities, investing activities, and financing activities. A statement of cash flows for Company P using the indirect method is as follows:
img The statement of cash flows is broken down into three sections of activities; operating, investing, and financing. The change in account balances from the balance sheet are indicated here to show how and where cash flows during the year.

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WHAT-IF ANALYSIS Suppose that an audit of Prime Sports Gear encountered the following two errors: a. Inventory totaling $4,500 should have been written off as worthless at the end of the year. Year-end inventory should be only $195,600. Net income is reduced to $$117,110. b. Checks totaling $20,000 for some of the salaries payable at year-end had in fact been written and mailed out on December 31, 2013. Thus, both the cash account and the salaries payable account are overstated at year-end. Correct both errors on the worksheet. Save your completed file as CASHFLOW4. Print the worksheet when done. What impact did each of these adjustments have on cash flow for 2013
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CHART ANALYSIS With the CASHFLOW4 file still on the screen, click the Chart sheet tab. On the chart, the components of cash flow for Prime Sports Gear over the last five years are plotted. Comment below on the behavior of each component. Do you see favorable trends Unfavorable ones When the assignment is complete, close the file without saving it again.
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