Question

Problem 9-A

F)

Statement of Cash Flows report with a run date of 12/31/-. Provide a narrative analyisis of this report.

Mike Bokman
Casey Corporation
Statement of Cash Flows
For Year Ended 12/31/18
Cash Flows from Operating Activities
Notes Receivable	50,382.00
Accounts Receivable	588,700.50
Merchandise Inventory	84,500.00
Notes Payable	14,500.00
Sales	121,995.00
Sales Discounts	-7,154.01
Cost of Merchandise Sold	-84,500.00
Interest Income	843
	--------------
Total Cash Received		769,266.49
Merchandise Inventory	-4,242.00
Store Supplies	2,115.32
Office Supplies	1,173.24
Prepaid Insurance	5,250.00
Accounts Payable	515,050.00
Notes Payable	14,260.00
Sales Salaries Expense	74,000.94
Advertising Expense	13,750.00
Misc. Selling Expense	850
Office Salaries Expense	20,310.61
Utilities Expense	8,991.47
Misc. General Expense	400
Interest Expense	10,349.80
Corporate Income Tax	26,800.00
	--------------
Total Cash Paid		689,059.38
		--------------
Net Cash Flow from Operating Activities		80,207.11
Cash Flows from Investing Activities
Store Equipment	3,400.00
	--------------
Total Cash Received		3,400.00
Office Equipment	3,100.00
	--------------
Total Cash Paid		3,100.00
		--------------
Net Cash Flow from Investing Activities		300
Cash Flows from Financing Activities
Mortgage Note Payable	4,290.20
Dividends	20,000.00
	--------------
Total Cash Paid		24,290.20
		--------------
Net Cash Flow from Financing Activities		-24,290.20
		--------------
Net Increase in Cash		56,216.91
Cash at Beginning of Year		67,534.52
		--------------
Cash at End of Year		123,751.43
		==============

Answer 1

Ans.:- Narrative Analysis of Statement of Cash Flows Report:-

Note:- There are two methods to prepare a statement of cash flow are 1.) Direct Method & 2.) In-direct Method and above report prepared on the basis of Direct Method.

Step-1= Analysis of Cash Flow From Operating Activities as follows:-

1.) As i told you that above statemnet is prepared on the basis of direct method so know lets talk about what is direct Method?

2.) In direct method such transactions are consider like sales, purchases, account receivable, notes receivable, notes payable, interest income etc.

3.) In this method we will add all such transaction from which we earned money like sales (after considering all discounts) and receivables from debtors, interest income as above statement.

4.) And we will deduct from such cash all expenses which are necessary to earned that money which is called matching concept. Likes Notes payables, purchases, actual tax piad, salaries, office expenses etc.

5.) As per above discussion if i simplify this so while preparing statement of cash flow we will consider only cash transaction whether it is income or expense;

6.) And eliminate all non-cash transaction while preparing cash flow statement.

Step-2= Analysis of Cash Flow From Investing Activities as follows:-

1.) In this activity we will consider sale and purchases related to fixed assets and investment.

2.) In this if there are sales transactions then we add such transaction and if there is purchases of any assets then we deduct from it and we will consider only net amount.

3.) In investing activities we will consider only investing amount whether we received or pay such amount.

Step-3= Analysis of Cash Flow From Financing Activities as follows:-

1.) In this activities we will consider such transactions from where we will finance amount for our company.

2.) Such as long term loans, Issue of share, deposit accepted etc. and as such amount in this activities.

3.) And we will deduct amount like redemption of debentures, dividend paid, interest paid, buy back of shares etc.

4.) By netting off above transactions we will get cash flow from/ used in financing activities.

And at last by netting of all the three activities we will get net cash flow from/used in activities. And this amount we will add or deduct from opening cash balance and we will get closing balance of cash at the end of year.