第六題 (a) Both the direct method and the indirect method for reporting cash flows from operating activities are acceptable in preparing a statement of cash flows according to SFAS No. 95; however, the FASB encourages the use of the direct method. Under the direct method, the statement of cash flows reports the major classes of cash receipts and cash disbursements, and discloses more information; this may be the statement's principal advantage. Under the indirect method, net income on the accrual basis is adjusted to the cash basis by adding or deducting noncash items included in net income, thereby providing a useful link between the statement of cash flows and the income statement and balance sheet. (b) The Statement of Cash Flows for George Winston Company, for the year ended May 31, 2002, using the direct method, is presented below. George Winston Company STATEMENT OF CASH FLOWS For the Year Ended May 31, 2002 Cash flows from operating activities Cash received from customers $1,233,250 Cash paid To suppliers $674,000 To employees 276,850 For other expenses 10,150 For interest 73,000 For income taxes 43,000 1,077,000 Net cash provided by operating activities 156,250 Cash flows from investing activities Purchase of plant assets (48,000) Cash flows from financing activities Cash received from common stock issue $ 40,000 Cash paid For dividends (105,000) To retire bonds payable ? (30,000) Net cash used by financing activities (95,000) Net increase in cash 13,250 Cash, June 1, 2001 20,000 Cash, May 31, 2002 $33,250 Note 1: Schedule of noncash investing and financing activities. Issuance of common stock for plant assets $50,000. Supporting Calculations: Collections from customers Sales $1,255,250 Less: Increase in accounts receivable 22,000 Cash collected from customers $1,233,250 Cash paid to suppliers Cost of merchandise sold $722,000 Less: Decrease in merchandise inventory 40,000 Increase in accounts payable 8,000 Cash paid to suppliers $674,000 Cash paid to employees Salary expense $252,100 Add: Decrease in salaries payable 24,750 Cash paid to employees $276,850 Cash paid for other expenses Other expense $ 8,150 Add: Increase in prepaid expenses 2,000 Cash paid for other expenses $10,150 Cash paid for interest Interest expense $75,000 Less: Increase in interest payable 2,000 Cash paid for interest $73,000 Cash paid for income taxes: Income tax expense (given) $43,000 (c) The calculation of the cash flow from operating activities for George Winston Company, for the year ended May 31, 2002, using the indirect method, is presented below. George Winston Company STATEMENT OF CASH FLOWS For the Year Ended May 31, 2002 Cash flows from operating activities Net income $130,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $25,000 Decrease in merchandise inventory 40,000 Increase in accounts payable 8,000 Increase in interest payable 2,000 Increase in accounts receivable (22,000) Increase in prepaid expenses (2,000) Decrease in salaries payable (24,750) 26,250 Net cash provided by operating activities $156,250 第七題 Cash flows from operating activities Net income $145,000 Adjustments to reconcile net income to net cash provided by operating activities: Change in accounting principle- depreciation $14,600 Depreciation expense 39,000 Gain on sale of investment (5,500) Income from equity method (10,800) Dividends from equity investment 800 38,100 Net cash provided by operating activities $183,100 Other comments: No. 1 is shown as a cash inflow from the issuance of treasury stock and cash outflow to purchase treasury stock, both financing activities. No. 2 is shown as a cash inflow from investing activities of $20,000 and the gain of $5,500 is deducted from net income in the operating section. No. 4 is a significant noncash investing and financing activity. No. 7 (dividends received) is added to net income. Another alternative is to net the Company's pro-rata share of the dividend against the income from equity method amount reported in the cash flows from operating activities. No. 8 is not shown on a statement of cash flows. -- 變化無常的一切 只是比喻而已 --

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