AC313 Chapter 21 Statement of Cash Flows Assignment

Part 1 Comparative Balance Sheets and Income Statements are provided below. In EXCEL, prepare Net Cash Flows from Operating Activities section of the statement of cash flows applying the indirect method for Year 5 and Year 6.

Maestrom Co.

Income Stataement

Year 6 Year 5 Year 4

Sales 117,200.0 93,750.0 75,000.0

COGS 82,040.0 65,625.0 52,500.0

__________________________________________

Gross Profit 35,040.0 28,125.0 22,500.0

SG&A Exps. 7,000.0 5,000.0 2,000.0

Deprec. Exp. 10,000.0 10,000.0 10,000.0

Taxes 7,262.0 5,250.0 4,200.0

________________________________________

Net Income 10,898.0 7,875.0 6,300.0

_________________________________________

_________________________________________

Masterom Co.

Balance Sheet

Assets Year 6 Year 5 Year 4

Cash 13,773.0 17,875.0 40,000.0

Accounts Receivable 170,000.0 120,000.0 50,000.0

Inventory 140,000.0 110,000.0 80,000.0

Land 50,000.0 50,000.0 50,000.0

Buildings & Equiptment 100,000.0 100,000.0 100,000.0

Less: Accumulated Depreciation (60,000.0) (50,000.0) (40,000.0)

_______________________________________________________________________________

Total Assets 413,773.0 347,875.0 280,000.0

_______________________________________________________________________________

_______________________________________________________________________________

Liabilities

Accounts Payable 145,000.0 90,000.0 30,000.0

Notes Payable - - -

Shareholders' Equity

Common Stock 125,000.0 125,000.0 125,000.0

Retained Earnings 143,773.0 132,875.0 125,000.0

_______________________________________________________________________________

Total Liabilities and S/E 413,773.0 374,875.0 280.000.0

_______________________________________________________________________________

_______________________________________________________________________________

For Parts 2 and 3 submit in a Word document.

Part 2 Compare Maestrom Co.s net income for Year 5 and 6 to Net Cash Flows from Operating Activities for Year 5 and 6.

Part 3 Explain why the accrual basis of accounting creates the need for a statement of cash flows. [Hint: Review net income (accrual basis) with Cash flow from Operating Activities (cash basis). See chapters 1, 4 and 21.]