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Principles of Accounting, Volume 1: Financial Accounting

Thought Provokers

Principles of Accounting, Volume 1: Financial AccountingThought Provokers
TP 1.

LO 16.2Use the EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) search tools on the US Securities and Exchange Commission website to locate the latest Form 10-K for a company you would like to analyze. Submit a short memo that provides the following information:

  • the name and ticker symbol of the company you have chosen
  • the following information from the company’s statement of cash flows:
    1. amount of cash flows from operating activities
    2. amount of cash flows from investing activities
    3. amount of cash flows from financing activities
  • the URL to the company’s Form 10-K to allow accurate verification of your answers
TP 2.

LO 16.3Use a spreadsheet and the following financial information from Mineola Company’s financial statements to build a template that automatically calculates the net operating cash flow. It should be suitable for use in preparing the operating section of the statement of cash flows (indirect method) for the year 2018.

Cash, Account Receivable, Prepaid Assets, Total Assets, Accounts Payable, Common Stock, Retained Earnings, Total Liabilities and Equity December 31, 2018, respectively: $57,000, 12,500, 1,500, 71,000, 2,700, 39,000, 29,3000, 71,000. Additional information: Net income, Dividends paid: 7,000, 4,000. Cash, Account Receivable, Prepaid Assets, Total Assets, Accounts Payable, Common Stock, Retained Earnings, Total Liabilities and Equity December 31, 2017, respectively: $42,000, 15,000, 1,100, 58,100, 1,800, 30,000, 26,300, 58,100.
TP 3.

LO 16.3Consider the dilemma you might someday face if you are the chief financial officer of a company that is struggling to maintain a positive cash flow, despite the fact that the company is reporting a substantial positive net income. Maybe the problem is so severe that there is often insufficient cash to pay ordinary business expenses, like utilities, salaries, and payments to suppliers. Assume that you have been asked to communicate to your board of directors about your company’s year, in retrospect, as well as your vision for the company’s future. Write a memo that expresses your insights about past experience and present prospects for the company. Note that the challenge of the assignment is to keep your integrity intact, while putting a positive spin on the situation, as much as is reasonably possible. How can you envision the situation turning into a success story?

TP 4.

LO 16.4Use the EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) search tools on the US Securities and Exchange Commission website to locate the latest Form 10-K for a company you would like to analyze. Pick a company and submit a short memo that provides the following information:

  • The name and ticker symbol of the company you have chosen.
  • A description of two items from the company’s statement of cash flows:
    • One familiar item that you expected to be reported on the statement, based on what you’ve learned about cash flows
    • One unfamiliar item that you did not expect to be on the statement, based on what you’ve learned about cash flows
  • The URL to the company’s Form 10-K to allow accurate verification of your answers
TP 5.

LO 16.5If you had $100,000 available for investing, which of these companies would you choose to invest with? Support your answer with analysis of free cash flow, based on the data provided, and include in your decision whatever other reasoning you chose to utilize.

Aswan Company From Statement of Cash Flows: Cash flow from operating activities 88,000. Cash flows from investing activities (30,000). Cash flows from financing activities 58,000. From other records: Capital expenditure costs 30,000. Cash dividends payments 32,000. Sales revenue 326,000. Net income 65,000. Total assets 150,000. Merrick Company From Statement of Cash Flows: Cash flow from operating activities 146,500. Cash flows from investing activities (50,000). Cash flows from financing activities (24,750). From other records: Capital expenditure costs 50,000. Cash dividends payments 52,000. Sales revenue 542,000. Net income 160,500. Total assets 350,000.
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