6014 Assessment 8 Overview Prepare a statement of cash flows for a hypothetical company using appropriate financial data and methods. Note: Some of the assessments in this course build upon each other, so you are strongly encouraged to complete them in the order in which they are presented. The statement of cash flows provides information about an organization’s inflows and outflows of cash during the reporting period. The information provided can give additional insight into the company’s financial condition. By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria: · Competency 1: Apply theories, models, and practices of accounting in the construction and analysis of financial statements. o Classify a company’s transactions into appropriate categories in a statement of cash flows. · Competency 3: Integrate accounting theories, models, and practices across the organization. o Create a statement of cash flows using appropriate financial data and methods. Context Cash flows fall into three categories: (1) operating activities, (2) investing activities, and (3) financing activities. · Operating activities include activities that are involved with ordinary business operations. These activities are recognized as the changes in current assets and current liabilities, such as inventory, prepaid expenses, accounts payable, and accrued expenses. For current assets, an increase in the account balance represents a decrease in cash. In contrast, an increase in a current liability account represents an increase in cashmeaning the company has deferred the amount of cash to be paid. · Investing activities include the cash inflows and outflows for the investment in the company. These investments include the acquisition of a fixed asset (cash outflow), proceeds received for sale of a fixed asset (cash inflow), and repayment of a long-term receivable (cash inflow). · Financing activities include the cash inflows and outflows with financing the company’s operations. Companies can utilize a variety of financing sources. Common financing transactions are the issuance of stock (cash inflow), payment of long-term borrowings (cash outflow), or dividend payments (cash outflow). Resources Required Resources The following resource is required to complete the assessment. · Statement of Cash Flows Template . Suggested Resources The following resources provide relevant financial accounting methods and practices. · Doran, D. T. (2012). Financial reporting standards: A decision-making perspective for non-accountants . New York, NY: Business Experts Press. o Chapter 5, “Liabilities: Current Contingent, and Long Term Debt,” pages 125-161 o Chapter 10, “Statements of Cash Flows,” pages 297-317 · Libby, R., Libby, P., & Hodge, F. (2017). Financial accounting (9th ed.). New York, NY: Irwin. – Available from the bookstore o Chapter 10, “Reporting and Interpreting Bonds,” pages 498527. o Chapter 12, “Statement of Cash Flows,” pages 588620. · Assessment Instructions Using the transactions listed below for Audrey’s Ice Cream Parlor, prepare a statement of cash flows for the month of April 2012. Classify the transactions into appropriate categories (operating activities, investing activities, and financing activities). To complete this assessment, use the Statement of Cash Flows Template to complete and submit the following information: · a. Received cash of $40,000 total ($10,000 each) from four investors. Each investor received 100 shares of common stock. This took place on April 1. · b. Paid three months’ rent for the store on April 1 at $2,000 per month (recorded as prepaid expenses). · c. Purchased ice cream and cones for $6,000 on account payable, due in 60 days. This took place on April 2. · d. Purchased supplies for $1,000 cash on April 2. · e. Received a two-year $11,000 loan at the bank. The note payable is dated April 2. · f. Used the money from (e) to pur…
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