Akm3 Week-10

Nama : Siti Arifah
NIM : 041911333010
Mata Kuliah : AKM 3 Tugas Week-10
EXERCISE 23-11
FAIRCHILD COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2022
(Indirect Method)
Cash flows from operating activities

Net income ..................................................................... € 810
Adjustments to reconcile net income to net cashprovided by
operating activities:
Depreciation expense (€1,200 – €1,170)................ € 30
Gain on sale of investments.................................. (80)
Decrease in inventory ............................................ 300
Increase in accounts payable................................ 400
Increase in receivables .......................................... (450)
Decrease in accrued liabilities .............................. (50) 150
Net cash provided by operating activities.................... 960
Cash flows from investing activities

Sale of held for collection investments
[(€1,470 – €1,300) + €80] ............................................. 250
Purchase of plant assets [(€1,900 – €1,700) – €70] ...... (130)
Net cash provided by investing activities .................... 120
Cash flows from financing activities

Issuance of ordinary shares [(€1,900 – €1,700) – €70] .. 130
Retirement of bonds payable ......................................... (250)
Payment of cash dividends ............................................ (260)
Net cash used by financing activities ............................ (380)
Net increase in cash................................................................. 700

Cash, January 1, 2022 .............................................................. 1,100
Cash, December 31, 2022......................................................... €1,800
Non-cash investing and financing activities*

Issuance of ordinary shares for plant assets................ € 70
*This information is presented in the notes
PROBLEM 23-4
MICHAELS COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2022
(Direct Method)
Cash flows from operating activitiesCash

receipts:
a
Cash received from customers .................................... $1,152,450
Dividends received ........................................... 2,400 $1,154,850
Cash payments:
Cash paid to suppliers ..................................... 765,000b
Cash paid for operating expenses .................. 226,350c
Taxes paid......................................................... 38,400d
Interest paid ...................................................... 57,300e 1,087,050
Net cash provided by operating activities............... 67,800
Cash flows from investing activitiesSale of
short-term investments
($8,000 + $4,000) ............................................ 12,000
Sale of land ($175,000 – $125,000) + $8,000.... 58,000
Purchase of equipment .................................... (125,000)
Net cash used by investing activities ............. (55,000)
Cash flows from financing activities
Proceeds from issuance of ordinary shares.... 27,500
Principal payment on long-term debt.............. (10,000)
Dividends paid .................................................. (24,300)
Net cash used by financing activities ............. (6,800)
Net increase in cash.................................................. 6,000
Cash, January 1, 2022 ............................................... 4,000
Cash, December 31, 2022 ......................................... $ 10,000
a
Sales Revenue.......................................................... $1,160,000
Increase in Accounts Receivable ............................................... (7,550)
Cash received from customers ................................ $1,152,450
b
Cost of Goods Sold ................................................. $ 748,000
Increase in Inventory ................................................ 7,000
Decrease in Accounts Payable ................................ 10,000
Cash paid to suppliers.............................................. $ 765,000
c
Operating Expenses............................................ $276,400
Depreciation/Amortization Expense ................... (40,500)
Decrease in Prepaid Rent .................................... (9,000)
Increase in Prepaid Insurance............................. 1,200
Increase in Office Supplies.................................. 250
Increase in Wages Payable.................................. (2,000)
Cash paid for Operating Expenses ..................... $226,350
d
Income Tax Expense........................................... $39,400
Increase in Income Taxes Payable...................... (1,000)
Taxes paid ..................................................... $38,400
e
Interest Expense ................................................. $51,750
Decrease in Bond Premium ................................. 5,550
Interest paid................................................... $57,300
FINANCIAL REPORTING PROBLEM
a. M&S uses the indirect method to compute and report net cash provided by operating
activities. The amounts of net cash provided by operating activities for 2018 and 2019
are £1,292.5 million and £1,069.8 million, respectively. The two items most
responsible for the decrease in cash provided by operating activities in 2019 are the
increase in operating profit and the increase in depreciation and amortization.
b. The most significant item in the investing activities section is the £958.4
million that M&S spent on ―property, plant and equipment.‖ The most
significant item in the financing activities section is the £631.7 million that
M&S received from issuing medium term notes.
c. M&S does not report deferred income taxes on its statement of cash flows. It does
report income tax expense as an add back to net income in the operating activities
section.
d. Depreciation and amortization is reported in the operating activities section of M&S’s
statement of cash flows as an add back to net income because it is a non-cash charge in
the income statement.
COMPARATIVE ANALYSIS CASE
a. Both Adidas and Puma use the indirect method of computing and reporting net cash
provided by operating activities.
(In millions) Adidas Puma
Net cash provided by operating activities £469 CHF10,763
b. The most significant investing activities items in 2019:

Adidas : Purchase of property, plant, and equipment and software £500 million
Puma : Disposal of businesses CHF10,999 million
The most significant financing activities items in 2019:

Adidas : Proceeds of new borrowings£4,382 million
Puma : Purchase of treasury shares CHF8,696 million
c. Adidas has decreased net cash provided by operating activities from 2018 to 2019 by
£343 million or 42.2%. Nestlé has decreased net cash provided by operating activities
by CHF2,676 million or 19.9%. Both companies have favorable trends in the
generation of internal funds (profits) from operations.
d. Both Adidas and Puma report depreciation and amortization in the operating activities
section:
Adidas, £244 million Puma, CHF3,249 million
Depreciation and amortization is reported in the operating activities section
because it is a non-cash charge in the income statement.
(e)
Adidas Puma
1. Current cash £469 CHF10,763
debt coverage (£3,388 + £4,614) = .12:1 (CHF33,223 + CHF43,326) = .28:1
2 2
2. Cash debt £469 CHF10,763

coverage (£5,361 + £7,165) = .07:1 (CHF51,299 + CHF60,585) = .19:1
2 2
f.) The current cash debt coverage ratio uses cash generated from operations during the
period and provides a better representation of liquidity on an average day. Puma’s ratio of
CHF.28 of cash flow from operations for every CHF of current debt was approximately 133%
higher than Adidas £.12 of cash flow from operations per pound of current debt and
indicates Puma was significantly more liquid in 2019 than Adidas.
The cash debt coverage ratio shows a company’s ability to repay its liabilities from cash
generated from operating activities without having to liquidate the assets employed in its
operations. Since Puma’s cash debt coverage ratio was approximately 171% larger (.19 vs.
.07) than Adidas, its ability to repay liabilities with cash flow from operations was
substantially greater than Adidas in 2019.

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Nama : Siti Arifah

Mata Kuliah : AKM 3 Tugas Week-10

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Net increase in cash................................................................. 700

Non-cash investing and financing activities*

Cash flows from operating activitiesCash

COMPARATIVE ANALYSIS CASE

(In millions) Adidas Puma

Net cash provided by operating activities £469 CHF10,763

b. The most significant investing activities items in 2019:

Puma : Disposal of businesses CHF10,999 million

The most significant financing activities items in 2019:

Puma : Purchase of treasury shares CHF8,696 million

2. Cash debt £469 CHF10,763

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