财务会计英文版课后习题答案Ch13.docx
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财务会计英文版课后习题答案Ch13.docx
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财务会计英文版课后习题答案Ch13
CHAPTER13
DISCUSSIONQUESTIONS
1.Themainpurposeofastatementofcashflowsistoprovideinformationaboutthecashreceiptsandcashpaymentsofanentityduringaperiodoftime.Thestatementofcashflowsalsoexplainsthechangesinthebalancesheetaccountsandthecasheffectsoftheaccrual-basisamountsreportedintheincomestatement.Inadditiontooperatingactivities,italsoprovidesinformationaboutanentity’sinvestingandfinancingactivities.Thisinformationshouldassistinvestorsandcreditorsinassessinganentity’sabilitytogeneratepositivefuturecashflows.
2.Cashequivalentsareshort-term,highlyliquidinvestmentsthatcanbeconvertedeasilyandquicklytocash.ExamplesincludeU.S.Treasurybills,moneymarketfunds,andcommercialpaper.Cashequivalentsaretobeincludedascash(i.e.,addedtocash)onastatementofcashflows.
3.Cashflowsfromoperatingactivitiesincludethoseitemsthatenterintothedeterminationofnetincome.Examplesarecashreceiptsfromthesaleofgoodsorservicesandfrominterest,andcashpaymentsforinventory,wages,taxes,interest,etc.
Cashflowsfrominvestingactivitiesresultfromtransactionsandeventsinvolvingthepurchaseorsaleofsecurities(otherthantradingsecurities),property,plant,andequipment,andotherassetsnotgenerallyheldforresale,andthemakingandcollectingofloans.Examplesincludetheproceedsfromthesaleofequipment,thepurchaseofabuilding,thesaleofabusinesssegment,thecollectionoftheprincipalamountonaloantoanotherentity,andthepurchaseofanotherentity’sequitysecurities(notheldastradingsecurities).
Cashflowsfromfinancingactivitiesresultfromtransactionsandeventswhereby
resourcesareobtainedfromorpaidtoowners(equityfinancing)andcreditors(debtfinancing).Examplesincludecashreceivedfromthesale(issuance)ofstock,cash
receivedfromabankloanorbyissuingbonds,dividendpaymentstostockholders,orcashusedtorepurchaseanentity’sownstock(treasurystock).
4.Significantnoncashinvestingandfinancingtransactionsaretobereportedseparatelyinaschedulebelowthestatementofcashflowsorinthenotestothefinancialstatements.Becausetheydonotinvolvecash,theyshouldnotbereportedinthebodyofthestatementitself.
5.Theprocessofconvertingfromaccrualrevenuestocashreceiptsinvolvesadjustingthebeginningandendingreceivablebalances.WeuseSalesRevenueand
AccountsReceivabletoillustratetheprocess.
Salesrevenue$100,000
+Beginningaccountsreceivable50,000
–Endingaccountsreceivable(40,000)
=Cashreceivedfromcustomers$110,000
Alternatively,thedecreaseintheaccountsreceivablebalancecouldbeaddedtosalesrevenuetoderivethe$110,000cash
receivedfromcustomers.
6.Byanalyzingtheincomestatementandcomparativebalancesheets,thefollowingsix-stepprocesscanbeusedtoprepareastatementofcashflows.
1.Computethechangeincashandcash-equivalentaccountsfortheperiodofthestatement(month,year,etc.).Thisistheamountthatwillreconcilethebeginningandendingcashbalances.
2.Converttheincomestatementfromanaccrual-basistoacash-basissummaryofoperationsby(a)eliminatingany
expensesthatdonotinvolvecash(e.g.,depreciation),(b)eliminatingtheeffectsofnonoperatingactivityitems(e.g.,gainsorlossesfromthesaleoflong-termassetsnotheldforresale),and(c)analyzingallnoncashcurrentoperatingaccountstoreportrevenuesand
expensesonacashbasis.
3.Analyzelong-termassetstoidentifythecashfloweffectsfrominvestingactivities.
4.Analyzelong-termdebtandstockholders’equityaccountstodeterminethecashfloweffectsfromfinancingactivities.
5.Prepareaformalstatementofcashflowsbyclassifyingallcashinflowsandoutflowsaccordingtooperating,investing,andfinancingactivities.Thenetcashflowsfortheperiodshouldbeequaltotheamountcomputedinstep1.Thenetcashflowsfortheperiodareaddedtothebeginningcashbalancetoequaltheendingcashbalance.
6.Reportanysignificantnoncashinvestingorfinancialtransactionsinanarrativeexplanationorinaseparatescheduletothestatementofcashflows.
7.Thenetcashflowsprovidedby(usedin)operatingactivitiescanbecalculatedby
eitherthedirectortheindirectmethod.Thedirectmethodreportsalloperatingcash
receiptsandpayments.Thedifferenceisthenetcashflowsfromoperations.Theindirectmethodreconcilesnetincome,asreportedontheincomestatement,withnetcashflowsfromoperations,ascalculatedonthecashflowsstatement.Thus,withtheindirectmethod,accrualnetincomeisconvertedtoacashbasisonthestatementitself.
8.Depreciationandsimilarnoncashitemsshouldnotbereportedonastatementof
cashflows.Theindirectmethodstartswithnetincome.Becausetheseitemshavebeenincludedinnetincome,theymustbeaddedtoorsubtractedfromnetincome.Withthedirectmethod,theyaresimplyignored.
9.Anysignificantnoncashtransactions(e.g.,thepurchaseofabuildingortheretirementoflong-termdebtbyissuingstock)shouldbereportedinanarrativeinthenotestothefinancialstatementsorinaseparateschedulebelowthestatementofcashflows.Also,ifthedirectmethodisusedtoreportcashflowsfromoperations,anoteorschedulemustbeincludedthatreconcilesnetincometonetcashflowsfromoperations.Iftheindirectmethodisused,disclosuremustbemadeoftheamountsofcashpaidforinterestandincometaxes.
10.Investorsandcreditorsmightuseastatementofcashflowstobetterassesstheamounts,timing,anduncertaintiesoffuturecashflows.Thisknowledgecanhelpthemtonoticeacompany’sshiftsinoperating,
investing,andfinancingpolicies.Itprovidesanswerstospecificquestions,suchas:
Whyweren’tdividendpaymentslarger?
Howwasanewbuildingfinanced?
Whyisthecompanyshortoncashwhenearningshave
increased?
PRACTICEEXERCISES
PE13–1(LO2)CategoriesofCashInflowsandOutflows
ThecorrectanswerisA.AnswersB,C,andDarethemaincategoriesofthestatementofcashflows.Thoseactivitiesthatmightbeclassifiedas“earningactivities”arepresentedmainlyintheoperatingactivitiessectionofthestatementofcashflows.
PE13–2(LO2)IdentifyingOperatingActivities
ThecorrectanswerisB.
a.Thisisanexampleofafinancingactivity.
b.Thisisanexampleofanoperatingactivity.
c.Thisisanexampleofaninvestingactivity.
d.Thisisanexampleofafinancingactivity.
PE13–3(LO2)IdentifyingInvestingActivities
ThecorrectanswerisD.
a.Thisisanexampleofanoperatingactivity.
b.Thisisanexampleofafinancingactivity.
c.Thisisanexampleofanoperatingactivity.
d.Thisisanexampleofaninvestingactivity.
PE13–4(LO2)IdentifyingFinancingActivities
ThecorrectanswerisB.
a.Thisisanexampleofaninvestingactivity.
b.Thisisanexampleofafinancingactivity.
c.Thisisanexampleofanoperatingactivity.
d.Thisisanexampleofaninvestingactivity.
PE13–5(LO3)ComputingNetChangeinCashforthePeriod
Theendingcashbalanceis$243,asshownbelow:
Cashprovidedby(usedin):
Operatingactivities$3,460
Investingactivities(3,730)
Financingactivities298
Netincreaseincashandcashequivalents$28
Cashatbeginningofyear215
Cashatendofyear$243
PE13–6(LO3)ComputationofCashfromOperatingActivities
Cashprovidedbyoperatingactivitiesis$203,asshownbelow:
Collectionsonaccount$4,286
Paymentsforinventory(2,874)
Paymentsformiscellaneousexpenses(1,031)
Paymentforinterest(43)
Paymentfortaxes(135)
Cashflowsfromoperatingactivities$203
Note:
Paymentstostockholdersasdividendsarefinancingactivitiesanddonotappearontheoperatingactivitiessectionofthestatementofcashflows.
PE13–7(LO3)SolvingforCashfromInvestingActivities
Cashusedininvestingactivitiesis($221,665),asshownbelow:
Endingcashbalance$13,405
Less:
Beginningcashbalance(12,540)
Changeincashaccountfortheyear$865
Cashfrom(usedin)operatingactivities$136,190
Cashfrom(usedin)financingactivities86,340
Cashfrom(usedin)investingactivities(221,665)
Changeincashaccountfortheyear$865
PE13–8(LO4)UsingAccountsReceivabletoComputeCashCollections
Thecompanycollected$4,557fromitscustomers,asshownbelow:
Salesonaccount$4,526
Add:
Beginningaccountsreceivable512
Less:
Endingaccountsreceivable(481)
Collectionsonaccount$4,557
AnotherwaytoconsiderthisproblemistomakeaT-accountwiththeinformationprovidedandsolvefortheunknown,asshownbelow:
AccountsReceivable
Beg.Bal.
512
Sales
4,526
Collections
?
?
End.Bal.
481
Toreconciletheaccountsreceivableaccount,wecanonlyassumethatcashcollectionsof$4,557occurred.
PE13–9(LO4)IdentifyingNoncashFlowItemsandNonoperatingActivityItems
Thegainonsaleofland($540)wouldbesubtractedfromnetincome,anddepreciationexpense($1,785)wouldbeaddedbacktonetincomewhencomputingcashfromoperatingactivities.Gainonsaleoflandrelatestoinvestingactivities(notoperatingactivities),anddepreciationexpenseisanoncashitem.
PE13–10(LO4)UsingInventoryandAccountsPayabletoComputeCashPaidforInventory
Tosolvethisproblem,considerthefollowingfourT-accounts:
Inventory
AccountsPayable
CostofGoodsSold
3,110
2,576
36,8431
36,8431
36,7152
36,7152
36,5733
2,982
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