Information for XYZ Co. Account Description December 31, 2017 December 31, 2016 Assets Cash and Cash Equivalents 45,000 13,000 Accounts Receivable 91,000 88,000 Equipment 139,000 22,000 Accum. Deprec. – Equipment (17,000) (11,000) Total 258,000 112,000 Liabilities & Stockholders’ Equity Accounts Payable 20,000 15,000 Bonds Payable 100,000 0 Common Stock 100,000 80,000 Retained Earnings 38,000 17,000 Total 258,000 112,000 Additional Information (A) – Net income for 2017 was $44,000. (B) – New equipment was purchased in 2017 but not was sold (C) – Cash dividends of $23,000 were declared and paid in 2017 (D) – $100,000 of equipment was purchased by the issuance of Bonds Payable Step 1 – Prepare a “Comparative Balance Sheet” and compute the change (increase or decrease) in the account balances during the period. This is your “anchor” and the Cash Flow Statement will reflect all of these changes either in: the “cash” section (a combination of (a) Operating Activities, (b) Investing Activities, and (c) Financing Activities) or, a “non-cash” section (for Non-Cash Investing and Financing Activities) Account Description 12/31/2017 12/31/2016 Increase Decrease Assets Cash and Cash Equivalents 45,000 13,000 Accounts Receivable 91,000 88,000 Equipment 139,000 22,000 Accum. Deprec. – Equipment (17,000) (11,000) Total 258,000 112,000 Liabilities & Stockholders’ Equity Accounts Payable 20,000 15,000 Bonds Payable 100,000 0 Common Stock 100,000 80,000 Retained Earnings 38,000 17,000 Total 258,000 112,000 Step 2– The “ultimate goal” of the Cash Flow Statement is to determine and detail why Cash and Cash Equivalents during the period ___________________. Step 3 – Prepare the “Operating Activities” section of the Cash Flow Statement. Net Cash Provided by (Used In) Operating Activities Step 4 – Prepare the “Investing Activities” section of the Cash Flow Statement. Investing Activities represent either amounts that a company invests in: (a) itself (i.e., capital expenditures or purchases for fixed assets, purchasing another business) or the disposals/sales of fixed assets or a business, and (b) the stock or bonds of other entities (i.e., purchasing an investment in the common stock or bonds of another company) or disposing of such investments Net Cash Provided by (Used in) Investing Activities
XYZ Co. Cash flow statement for the year ended 31 December 2017 Cash flow from operating activities Net Income 21,000 Add: depreciation 6000 Net income before changes in working capital 6000 Increase in accounts receivable -3000 Increase in accounts payable 5,000 2000 Net cash flow from operating activities(A) 29,000 Cash flow from investing activities Purchase of equipment -117000 Net cash flow from Investing activities(B) -117000 Cash flow from financing activities Proceeds from issue of bonds 100000 Proceeds from issue of common stock 20000 Net cash flow from financing activities (C ) 120000 Cash and cash equivalents at the beginning of the year 13000 Net increase in cash and cash equivalents 32000 Cash and cash equivalents at the end of the year 45000 Explanations: Increase in retained earnings is the "Net income" Increase in accounts receivables no fund inflow to the extent of $3,000 Increase in accounts payable no fund outflow to the extent of $5,000 bonds payable was increased, it means company issued a bonds. Common stock is always finance activity, if it is in asset side it is "investing activity".
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