Statement of cash flows Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company. Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company. Indirect method : Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities. Deduct increase in current assets. Deduct decrease in current liabilities. Add decrease in current assets. Add the increase in current liability. Add depreciation expense and amortization expense. Add loss on sale of plant assets. Less gain on sale of plant assets. Cash flow from investing activities: This section of cash flows statement provides information concerning about the purchase and sale of capital assets by the company. Deduct the amount of cash used to purchase any fixed assets. Add the amount of cash received from sale of any fixed asset. Cash flow from financing activities: This section of cash flows statement provides information about the cash inflow and outflow as a result of issuance and financing of debt, issue of new stock and payment of dividends. Add the amount of cash received from any sources of finance. Deduct the amount of cash used for payment for dividend and interest from financing activities. Deduct the amount of cash used for payment of treasury stock from financing activities. Non- cash transactions The transaction which does not involve any cash dealings is known as non-cash transactions. In these type transactions there will not be any inflow or outflow of cash. Simply put, the transaction which does not have an impact on the inflow or outflow of cash is called as non-cash transactions. To Prepare: Statement of cash flows of “G” Company using indirect method.

Question

East Georgia Community Hospital enters into a contract to provide $15,000 of elective medical care to a patient. After a review of the patient's ability and intent to pay, the hospital does not expect to collect the full contract price of $15,000. However, the hospital occasionally performs "discounted" procedures to members of the community to enhance its standing in the local area. While the hospital invoiced the customer for the full amount of the services, it only expects to collect $10,000. What amount of revenue should the hospital recognize?

Answer 1

Question

Chapter 12, Problem 12.4EYCT

(a)

To determine

Statement of cash flows

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Deduct increase in current assets.

Deduct decrease in current liabilities.

Add decrease in current assets.

Add the increase in current liability.

Add depreciation expense and amortization expense.

Add loss on sale of plant assets.

Less gain on sale of plant assets.

Cash flow from investing activities: This section of cash flows statement provides information concerning about the purchase and sale of capital assets by the company.

Deduct the amount of cash used to purchase any fixed assets.

Add the amount of cash received from sale of any fixed asset.

Cash flow from financing activities: This section of cash flows statement provides information about the cash inflow and outflow as a result of issuance and financing of debt, issue of new stock and payment of dividends.

Add the amount of cash received from any sources of finance.

Deduct the amount of cash used for payment for dividend and interest from financing activities.

Deduct the amount of cash used for payment of treasury stock from financing activities.

Non- cash transactions

The transaction which does not involve any cash dealings is known as non-cash transactions. In these type transactions there will not be any inflow or outflow of cash. Simply put, the transaction which does not have an impact on the inflow or outflow of cash is called as non-cash transactions.

To Prepare: Statement of cash flows of “G” Company using indirect method.

(b)

To determine

To analyze: the statement made by M and P with reference to the statement of cash flow.

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East Georgia Community Hospital enters into a contract to provide $15,000 of elective medical care to a patient. After a review of the patient's ability and intent to pay, the hospital does not expect to collect the full contract price of $15,000. However, the hospital occasionally performs "discounted" procedures to members of the community to enhance its standing in the local area. While the hospital invoiced the customer for the full amount of the services, it only expects to collect $10,000. What amount of revenue should the hospital recognize?

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