Tiểu luận môn kế toán quốc tế preparing and presentation of cash flow statement

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
POSTGRADUATE EDUCATION INSTITUTE

INTERNATIONAL ACCOUNTING
TOPIC 6: PREPARING AND PRESENTATION
OF CASH FLOW STATEMENT

Instructor: Ph.D PHẠM QUANG HUY

Ho Chi Minh City, July 2016


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
POSTGRADUATE EDUCATION INSTITUTE

INTERNATIONAL ACCOUNTING
TOPIC 6: PREPARING AND PRESENTATION
OF CASH FLOW STATEMENT

MEMBERS
No.

Name

Student Code

1

Lý Minh Triết

7701251065A

2

Nguyễn Lê Phượng Sang

7701250852A

3

Trương Á Bình

7701250350A

4

Nguyễn Ngọc Hoàng Khiêm

7701250599A

5

Nguyễn Đỗ Ngọc Phú

7701250783A

6

Nguyễn Thị Kim Chi

7701250368A

7

Nguyễn Thị Thanh Định

7701250435A

8

Lê Phương Thảo

7701250953A

Ho Chi Minh City, July 2016

2


ACKNOWLEDGEMENTS
Firstly, we would like to thank the university board that has created the best
conditions for learning facilities, modern equipment... to help the research process and
completion of group assignments easier.
We also grateful to the management of library staff that has created the best
conditions for us to refer to the documentations, finding information from books and from
the Internet systems.
Especially, our deepest appreciation goes to Ph.D. Phạm Quang Huy who has
provided us the knowledge to do this homework.
Sincerely,

3

Exercise No. 18
The Balance sheet for December 31, 2016, December 31, 2017, and the Income
statement for the year ended December 31, 2017, for Rocket Company follows.
ROCKET COMPANY
BALANCE SHEET
December 31, 2017 and 2016
31-Dec-17

31-Dec-16

Assets
Cash
Account receivables, net
Inventory
Land
Building and equipment
Accumulated depreciation
Total assets

25,00
0
60,00
0
80,00
0
50,00
0
130,00

0
(85,00
0)
260,00
0

20,00
0
70,00
0
100,00
0
50,00
0
115,00
0
(70,00
0)
285,00
0

30,00
0
4,00
0
5,00
0
50,00
0
110,00

0
61,00
0
260,00
0

35,00
0
3,00
0
3,00
0
60,00
0
100,00
0
84,00
0
285,00
0

Liabilities and stockholder's equity
Account payable
Income tax payable
Wages payable
Current notes payable
Common stock
Retained earnings
Total liabilities and stockholder's equity
Cash payment for building and equipment

Cash paid for retirement of notes payable
Cash receive from issuance of stock

4

15,000
10,000
10,000


ROCKET COMPANY
INCOME STATEMENT
For the year ended December 31, 2017
500,
000

Sales
Less expenses:

(330,
000)
(90,
000)
(5,
000)
(425,
000)
75,
000
(30,

000)
45,
000

COGS
Selling and administrative expenses
Interest expense
Total expense
Income before taxes
Income tax expense
Net income

Note: Cash dividends of $68,000 were paid during 2017
a. Prepare the statement of cashflow for 2017 (indirect approach)
STATEMENT OF CASHFLOW (INDIRECT METHOD) OF ROCKET
COMPANY FOR THE YEAR ENDED 31 DECEMBER 2017
Profit before tax/(loss)

01

75,
000

Adjustments for:
Depreciation and amortisation

02

Interest expense

06

Interest income

07

Operating profit/(loss) before adjustments to working capital

08

(Increase)/decrease in accounts receivable

09

(Increase)/decrease in inventory

10

Increase/(decrease) in accounts payable

11
5

15,000
5,000
95,000
10,000
20,000

(3,000)
Interest paid

12

Retirement allowance paid

13

Corporate income tax paid

14

Cash generated from (used in) operating activities before
corporate income tax

20

(5,000)
(10,000)
(29,000)
78,000

Cash flows from investing activities
Purchase of fixed assets and construction in progress

21

Net cash inflows/(outflows) from investing activities

30

(15,000)
(15,000)

Cash flows from financing activities
Cash receive from issuance of stock

31

Dividend paid to Investors

32

Net cash inflows/(outflows) from financing activities

40

Net increase/(decrease) in cash

50

Cash and cash equivalents at beginning of the period/year

60

Effects of changes in foreign exchange rates

61

Cash and cash equivalents at end of the period/year

70

10,000
(68,000)
(58,000)
5,000
20,000
25,000

b. Compute the ratio operating cashflow/current maturities of long term debt amd
current notes payable
Operating cash flow

78,000
=

Current mature of long term debt and current notes payable

=

1.56

50,000

c. Comment on the statement of cash flows and ratio computed in (b)
Operating cash flow is positive with amount of 5.000 which the company have
enough finance from mainly operating to support other activites
The biggest outflow is 65.000 from finance activity

6


• If A>1 : The company has resoures from operating activity to cover its debt
• If A<1 : The company does not have enough resoures from operating activity to
cover its debt
=> In this case, because A=1.56>1, it means the company has finance ability for the
company's operation
Exercise No. 19
The Balance sheet for December 31, 2016, December 31, 2017, and the Income
statement for the year ended December 31, 2017, for Hartman Company follows.
HARTMAN COMPANY
BALANCE SHEET
31-Dec-17

31-Dec-16

Assets
297,00

Cash

0

153,00
0

159,00

Receivables

0

117,00
0

150,00

Inventory

0

180,00
0

18,00

Prepaid expenses

0

27,00
0

1,260,00

Plant assets

0

1,050,00
0

(450,00

Accumulated depreciation

0)

(375,00
0)

153,00

Patent

0

174,00
0

1,587,00

Total assets

0

1,326,00
0

Liabilities and stockholder's equity
153,00

Account payable

0

168,00
0

60,00

Accrued liabilities

42,00

0

0

-

0

450,00

Mortage payable

525,00

Preferred stock

0

Additional paid-in capital - preferred

120,00

0

600,00

Common stock

0
7

600,00
0


129,00

Retained earnings

0

Total liabilities and stockholder's equity

66,00

0

1,587,00
0

1,326,00
0

HARTMAN COMPANY
INCOME STATEMENT
For the year ended 31 December, 2017
Sales
COGS
Gross profit
Operating expenses
Net income

1,980,000
(1,089,000)
891,000
(690,000)
201,000

a. Prepare a statement of cashflow (indirect method) for Hartman, Inc. FY 31 Dec
17
STATEMENT OF CASHFLOW (INDIRECT METHOD) OF HARTMAN,
INC. FOR THE YEAR ENDED 31 DECEMBER 2017
Profit before tax/(loss)

201,000

Adjustments for:
Depreciation and amortisation

96,000

Interest expense

-

Interest income

-

Operating profit/(loss) before adjustments to working capital
(Increase)/decrease in accounts receivable
(Increase)/decrease in inventory

297,000
(42,000)
30,000

Increase/(decrease) in accounts payable
Increase/(decrease) in prepaid expenses
Cash generated from (used in) operating activities before
corporate income tax
Cash flows from investing activities
Purchase of fixed assets

3,000

9,000
297,000
(

8


210,000)
Proceeds from disposal of fixed assets

(
210,000)

Net cash inflows/(outflows) from investing activities
Cash flows from financing activities
Capital contributions

645,000
(
138,000)
(
450,000)

Dividend paid to Investors
Debt repayment
Net cash inflows/(outflows) from financing activities

57,000

Net increase/(decrease) in cash

144,000

Cash and cash equivalents at beginning of the period/year

153,000

Effects of changes in foreign exchange rates

-

Cash and cash equivalents at end of the period/year

297,000

b. Prepare a schedule of cash provided by operating activities using the direct
method
OB
117
,000
168
,000

Increase
1,980,0
00
1,089,0
00

Decrease

(1,938,00
0)
(1,104,00
0)

Cash receipts from customers
Cash paid to suppliers
Cash paid for other operating expenses
Net cash from operating activities

9

CB
1
59,000
1
53,000

1,938,00
0
(1,074,00
0)
(567,00
0)
297,0
00


(690,00
0)

COGS
Adjust expenses not paid by cash:

75,0
00
21,0
00
(18,00
0)
27,0
00
60,0
00
(42,00
0)
(567,00
0)

- Depreciation
- Written off patent
- Prepaid has not allocated
- Allocation
- Accrued at YE
- Revert during the year

10


Exercise No. 20

EUSEY, INC
Net change in the BS account
Cash
Accounts receivable
Allowance for doubtful accounts
Inventory
Prepaid expenses
Long term investments
Land
Building
Machinery
Office equipment
Acc. Depre Building
Acc. Depre Machinery
Acc. Depre Office equipment
Liabilities and stockholder's equity
Account payable
Accrued liabilities
Dividends payable
Preminum on bonds
Bonds payable
Preferred stock ($50 par)
Common stock ($10 par)
Additional paid-in capital - common
Retained earnings

31-Dec-17
125,600
(64,000)
(14,000)

217,200
20,000
(144,000)
300,000
600,000
100,000
(28,000)
(24,000)
(20,000)
12,000
183,200
(72,000)
(128,000)
(32,000)
(800,000)
60,000
(156,000)
(223,200)
87,200

1.
INCOME STATEMENT
For the year ended 31 Dec 17
Income before extraordinary item
Extraordinary loss: condemnation of land
Net income

272,000
(132,000)
140,000

2. Cash dividend of 128,000 were declared Dec 15, 2017; payable Jan 15, 2018
Dr RE
128,000
Cr Dividends payable
128,000
5% of stock dividend was issued Mar 31, 2017, when the market value was
$22.00 per share
No. of dividend share as at 31 Mar 17 36,000 (from point 7, assume that owners of
preferred stocks did not receive stock dividend)
Notes:
- Movement of No. of stock during the year
11

15,600


- Selling of additional shares
12,000
=> Additional shares (stock dividend)
3,600
Check:
No. of shares as at 31 Mar 16
72,000
5% stock dividend
3,600
Dr RE
72,000
Cr Common stock
36,000

Cr Additional paid-in capital – common
43,200
3. Long term investments were sold for 140,000
Dr Cash
Dr Loss on sold long term investment
Cr Long term investment

140,000
4,000

4. Building and land
Cost
480,000
Book value
300,000
Selling price
400,000
Cost of the land
20,000
Dr Cash
400,000
Dr Acc Depr of building
180,000
Cr Building
Cr Land
Cr Gain on disposal of building and land

144,000

460,000

20,000
100,000

5. Entry was made to record an exchange of old machine for new one
Dr Machinery
160,000
Dr Accumulated Depreciation – Machinery
40,000
Cr Machinery
60,000
Cr Cash
140,000
6. Fully depreciated copier machine which cost 28,000 was written off
Dr Acc depr of Copier machine
28,000
Cr Office equipment (Coppy Machine)
28,000
7. Preferred stock of $60,000 par value was redeemed for 80,000
Dr Preferred stock
60,000
Dr RE
20,000
Cr Cash
80,000
8. The company sold 120,000 shares of its common stock ($10 par) on June 15, 2017
for $25 a share. There were 87,600 shares outstanding on December 31, 2017
Dr Cash
300,000
Cr Common stock
120,000

Cr Additional paid-in capital – common
180,000
9. Bonds were sold at 104% on December 31, 2017
12


Dr Cash

832,000
Cr Premium on Bonds
32,000
Cr Bonds Payable
800,000
10. Land that was condemned had a book value of 240,000
Dr Loss on land condemnation
132,000
Dr Cash
108,000
Cr Condemed land
240,000

STATEMENT OF CASHFLOW (INDIRECT METHOD) OF EUSEY, INC.
FOR THE YEAR ENDED 31 DECEMBER 2017
Profit before tax/(loss)

140,000

Adjustments for:
Depreciation and amortisation

280,000

Decrease in provisions

14,000
(
100,000)

Gain from disposal of land and building
Loss from disposal of long term investment
Loss on condemnation of land

4,000
132,000

Operating profit/(loss) before adjustments to working capital
(Increase)/decrease in accounts receivable
(Increase)/decrease in inventory
Increase/(decrease) in accounts payable
Increase/(decrease) in prepaid expenses

470,000
64,000
(
217,200)
(
111,200)
(20,000)

Cash generated from (used in) operating activities before corporate

income tax

185,600

Cash flows from investing activities
(
140,000)
(

Acquisition of machinery
Acquisition of land
13


560,000)
(1,
060,000)

Acquisition of building
Proceeds from disposal of land and building
Proceeds from divestments in other entities
Proceeds from condemnation of land
Net cash inflows/(outflows) from investing activities

400,000
140,000
108,000
(1,
112,000)

Cash flows from financing activities
Proceeds from selling bond

832,000

Proceeds from common stock

300,000

Redeemed preferred stock

(80,000)

Dividend paid to Investors
Net cash inflows/(outflows) from financing activities
Net increase/(decrease) in cash

1,
052,000
125,600

Cash and cash equivalents at beginning of the period/year
Effects of changes in foreign exchange rates
Cash and cash equivalents at end of the period/year

14

125,600