Every term, formula, and entry

0 of 16 terms in your words

Terms

C1 Statement of cash flows: A statement reporting cash inflows and outflows for a period, sorted into operating, investing, and financing activities.
C1 Cash: Currency and demand deposits available for current operations.
C1 Cash equivalents: Short-term, highly liquid investments so close to maturity that they are treated as cash.
C1 Operating activities: Cash flows from a company's main business — transactions that determine net income.
C1 Investing activities: Cash flows from buying and selling long-term assets and other investments.
C1 Financing activities: Cash flows from transactions with a company's owners and creditors, other than for operating purposes.
C1 Noncash investing and financing activities: Significant investing or financing transactions not involving cash, disclosed separately rather than included in the statement.
P2 Direct method: Reports operating cash flows by listing each major class of cash receipt and cash payment.
P1 Indirect method: Reports operating cash flows by adjusting net income for noncash items and changes in current operating assets and liabilities.
P1 Reconciliation (of net income to operating cash flow): The indirect-method walk from net income to net cash provided by operating activities.
P1 Operating items not providing or using cash: Expenses like depreciation that reduce net income without any cash movement, added back under the indirect method.
P1 Nonoperating gains and losses: Gains and losses from investing or financing transactions, removed from operating activities and reported at the actual cash amount in their own section.
A1 Changes in current operating assets and liabilities: Increases and decreases in accounts like receivables, inventory, and payables, each adjusted for in the indirect method.
A2 Free cash flow: Cash provided by operating activities minus cash used for capital expenditures.
A2 Cash flow on total assets: Cash flow from operating activities divided by average total assets, measuring cash return on asset investment.
P3 Spreadsheet (work sheet) method: [book?] — check this edition’s exact terminology. A working paper some preparers use to organize the statement’s adjustments.

Formulas

P1	Operating cash flow (indirect) = Net income + Non-cash expenses + Losses − Gains − Increases in current assets + Increases in current liabilities	$38,000 + $24,000 + $6,000 − $16,000 − $36,000 + $4,000 = $20,000
P2	Cash received from customers = Sales − Increase in accounts receivable	$590,000 − $20,000 = $570,000
P3	Net change in cash = Operating + Investing + Financing	$20,000 + $2,000 − $17,000 = $5,000
P3	Ending cash = Beginning cash + Net change	$12,000 + $5,000 = $17,000
A2	Free cash flow = Operating cash flow − Capital expenditures	$20,000 − $10,000 = $10,000
A2	Cash flow on total assets = Operating cash flow ÷ Average total assets	$20,000 ÷ $200,000 = 10.0%

Every entry the chapter teaches

(depreciation) Record depreciation expense

	Depreciation expense	24,000
	Accumulated depreciation—Plant assets		24,000

(disposal) Sell plant assets (cost 30,000, accumulated depreciation 12,000) for 12,000 cash

Cash	12,000
Accumulated depreciation—Plant assets	12,000
Loss on sale of plant assets	6,000
Plant assets		30,000

(retirement) Retire notes with a 34,000 carrying value for 18,000 cash

Notes payable	34,000
Cash		18,000
Gain on retirement of notes		16,000

(purchase) Buy plant assets costing 70,000: 10,000 cash and a 60,000 note

Plant assets	70,000
Cash		10,000
Notes payable		60,000

(issue-stock) Issue common stock for 15,000 cash

	Cash	15,000
	Common stock		15,000

(dividends) Pay 14,000 cash dividends

	Retained earnings	14,000
	Cash		14,000