had my last paper done by you guys and it was pretty good. I still need to do better on this one, and really need it on a PhD level. Please help. I was told to select 3 problems for this assignment, because on the excel sheet, the answers are at the end of the page (but I still need you to fill them in because I have very little time on my hands), then there is the Essay Questions (which do not have to be extremely long). Thanks for everything.
1.The rule-of-thumb in evaluating the cash flows of an organization is: ◦The cash flows from operations should be positive, and increasing each year, and ideally should be sufficient to cover any negative cash flows from investing activities.
◦How would you evaluate China Trade in terms of cash flows, in light of this rule-of-thumb measure?
2.China Trade’s income statement (after adjusting for depreciation expense and adjusting entries) shows net income of $300. Yet, its cash flows from operations were a negative $3,000. What caused a $300 accrual basis profit to become a $3,000 “loss” in terms of cash flows from operations?
A continuing case study…
CHINA TRADE, INC.
Part IV – Statement of Cash Flows
Learning Objectives
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l To understand what information the Statement of Cash Flows provides
l To classify cash transactions in the appropriate Operating, Investing or
Financing activity categories, and thereby prepare a Statement of
Cash Flows under the “direct method”.
l To prepare the Cash Flows from Operating Activities section under the
“indirect method”, using increases and increases in balance sheet amounts.
l To evaluate an organization’s cash flows, using a rule-of-thumb measure.
Requirements
a. For each of the cash transactions under the “Transactions”, tab, enter the cash
amount in the Inflows or Outflows column of the Cash Flows Journal as
appropriate (see “CashFlows” tab). Select the appropriate “classification code”
from the code numbers on the Statement of Cash Flows.
The first transaction has already been entered to serve as an example.
If a transaction does not involve cash, leave that line blank.
For answers to all the adjusting entries, click on the “Answer” tab.
b. Note that the Statement of Cash Flows is prepared from your
postings automatically. When you have completed all the cash
postings, check the end-of-period balance to make sure it agrees with
the Cash amount on the balance sheet at August 31 (see “Balance
Sheet” tab.)
c. In the tab called “Indirect” is a skeleton for the Operating Activities
section of the Statement of Cash Flows as it would appear under the
“indirect method.” Fill in the amounts on the blank lines by referring
to the income statement and balance sheet contained in the “Income
& Retained Earnings” and “Balance Sheet” tabs. Note that increases
in asset accounts become negative adjustments and are to be shown
in brackets and subtracted from net income rather added. The
opposite is true of liabilities.
Note also that since all balance sheet accounts started with a zero
balance at the beginning of this first month of operations, the amount
of increase of each account is the same as the ending balance.
Normally, it would be necessary to subtract the beginning balance
from the ending balance to arrive at the amount of increase or
decrease for the period.
When finished check your answer to the one contained in the
“Answer” tab.
d. Check to make sure the net cash flows from operating activities
under the “indirect method” is the same as the net cash flows
from operating activities under the “direct method”.
e. Essay Questions
Go to the tab called “Essays” and write your answers in a separate Word
document. Do NOT write them in the Excel workbook.
All essay questions require full, grammatically correct sentences which include
your reasoning and/or explanation. It is strongly suggested that you start each
answer with the wording of the question; for example “Overhead costs cannot be
charged directly to individual jobs because…”
