Chapter 13 Questions
1. The income statement provides the initial starting point for the financial statements. The balance sheet allows the evaluation of what is happening to various accounts.
2. The statement of cash flows show how much cash was generated by the business during a given period of time. While the income statement shows how much was made or lost overall, the cash flow statement shows how much of that money was cash.
5. Inventory, Accounts receivable, accounts payable, and other short-term assets and liabilities.
6. No. It is re-added because depreciation is accounted for under the accrual method. Depreciation has no bearing on cash, however it is added back in to compensate for when it was subtracted from the income statement.
10. Investing inflows include when property and equipment are sold for cash. Outflows include buying buildings and investments in other companies.
11. Financing inflows include issuing stock and getting loans from banks. Outflows include paying loan principles.
12. Selling equipment would be reported as a positive cash flow under the investment section.
Chapter 13 Exercises
Exercise 1
1. O
2. I
3. F
4. O
5. I
6. F
7. F
8. O
9. O
10. F
Exercise 2
1. NCFI, -
2. NE
3. NCFO, +
4. NCFO, -
5. NCFO, -
6. NCFF, -
7. NCFO, -
8. NCFI, +
9. NCFO, -
10. NCFF, -
Exercise 6
Income $12,000
Depreciation $6,000
Inventory $8,000
Less A/R ($5,000)
Less S/P ($500)
Total: $21,500
Exercise 10
A/R: Net increase.
Inventory: Net decrease
Current Assets: Net decrease
A/P: Net increase
Income Taxes: Net increase
Current liabilities: Net decrease.