Reference no: EM131231034

Assessment 3

This assessment includes two parts. Complete both parts using the templates provided. Both templates are linked in the Resources under the Required Resources heading. Submit both completed templates for the assessment.

Part 1: Types of Cash Inflows and Outflows

You know that the cash flow statement classifies cash receipts and cash payments as operating, investing, and financing activities. Before preparing the cash flow statement, accounting data must be analyzed to locate transactions in both the cash account and other locations. After the transactions have been located, it should be determined whether each one affects operating, investing, or financing cash flow. Last, whether the transaction results in a cash inflow or outflow must be ascertained. Accountants consider this statement to be foundational for a business to continuously operate.

For this part of the assessment, use the Assessment 3, Part 1 Template to classify each of the following cash inflows and outflows as operating, investing, or financing activities:

1. Sale of a piece of company equipment.
2. Sale of common stock.
3. Payment to suppliers for merchandise purchased.
4. Payment to lenders for interest on note payable.
5. Sale of investments in other companies.
6. Purchase of land to expand plant size.
7. Payment to stockholders as cash dividends.
8. Sale of goods or services.
9. Payment to employees for wages and salaries.
10. Lending of money to other business entities.
11. Payment to government for property and income taxes.
12. Collection of principal on loans to other entities.
13. Interest and dividends received.
14. Issue of bonds to support company growth.
15. Purchase of investments in debt or equity of other entities.
16. Payment to other entities to cover expenses incurred.
17. Buyback of company stock from investors.

Part 2: Cash Flow Statement Preparation

The cash flow statement is an important, and often overlooked, financial statement. However, it can provide important data for use by internal organization management. By analyzing the balance sheet and income statement, the accountant can then prepare the statement and share the results with both internal and external users.

Use the Assessment 3, Part 2 Template to determine the appropriate activity (operating, investing, or financing) for each transaction listed for Skylar Enterprises, Inc., and prepare the cash flow statement using the indirect method in good form for reporting. Data is provided in the Information worksheet in the template; complete the statement of cash flow in the Cash Flow Statement worksheet. Use the suggested materials in the Resources if you need more information on preparing cash flow statements.