Hi, Else here.
And we've just completed the video.
I've covered Alexis.
We're going to move on to example 2--
Cooper Company.
Cooper Company again has a current year and a prior year.
Information provided is equipment and accumulated
depreciation.
Make sure if you have not downloaded the cash flow
questions that I've provided, that you download them so you
have them available to you.
We know from the additional information
that equipment with a cost of $24,000
and accumulated depreciation of $15,000 was sold for cash.
Equipment was also purchased for cash.
Keep in mind that this piece of information right here--
equipment was also purchased for cash-- is not
necessary to give students.
There are instructors who would assume
that students will discover this information for themselves.
Let's go through the steps in the process.
We already know that a T-account proof is necessary,
so we're going to provide a blank T-account.
We've got one for equipment, one for accumulated depreciation.
And we also know we need to have the sale entry, that
would be a debit to cash, a debit
to accumulated depreciation, a credit to equipment,
and we do not know whether there will be a gain or loss on sale.
We're going to leave that blank.
Let's go back up.
Next step is to fill in the information
from the statement of financial position,
also called the balance sheet.
So I'm going to use this information right here in order
to fill it in.
Equipment has an opening balance of 262,000,
a closing balance of 270,000.
Accumulated depreciation has an opening balance of 109
and a closing balance of 118.
We filled in what we can from the balance sheet.
Now the next step in the process is to use the income statement
to fill in whatever we can.
Hopefully you have already downloaded this question.
If you have not, make sure you download it,
because it's not going to make any sense unless you have it
in front of you.
So we look at the income statement
and we see immediately that the income statement includes
depreciation expense of $24,000, so we can fill
in that information right here.
We see that the income statement also
shows a gain on sale of equipment, $3,000,
so I can fill that in now.
Anything else available on our income statement?
No.
What do we move on to?
Additional information.
So here is the additional information-- equipment
with a cost of $24,000 and accumulated depreciation
of $15,000.
So we now know the numbers for our entry.
We've got accumulated depreciation, 15,000,
and we have equipment of 24,000.
I can use this entry now to fill in the blanks of my T-account.
Accumulated depreciation, 15,000, credit the equipment
account, 24,000.
Now the next step is to solve for all the unknowns.
Cash of course, I can calculate very easily.
Cash is $12,000.
I can go over here and solve for this amount right here.
Even if the information does not say--
remember, equipment was also purchased--
even if it doesn't say that, I'm going
to solve for this just to double check.
So I see right here that this is now 32,000.
Anything else I have to solve for?
Everything is solved for.
Now I'm going to categorize into the correct categories.
Let's start with the equipment T-account.
This amount right here is a purchase--
investing activities.
I am purchasing something, so I'm getting equipment.
What am I giving away?
I'm giving away cash.
I do not need this, because it is historical information.
I do not need this, it's historical information.
I do need this because this is depreciation expense.
Depreciation expenses on the income statement as a negative,
however it's a non-cash item, so I need to get rid of it.
How do you get rid of a negative number?
You put it into operating activities
and you put a positive number against it.
Right here, cash.
Anything having to do with cash has
to go on the cash flow statement.
This is the sale of equipment.
We know that anything having to do with property, plant,
and equipment always goes into investing activities.
And this is a debit to cash, which is an inflow,
so that's a plus.
Accumulated depreciation, historical information,
ignore it.
Equipment, historical information, ignore it,
but this gain on sale is sitting on my income statement.
We can see right here from this entry
that this has nothing to do with cash.
This is my cash impact.
This has nothing to do with cash.
Therefore, I have to remove it from the income statement.
It's a gain on sale, a credit on the income statement, which
means it's increasing the revenues.
Therefore, I have to remove it.
This is going to be operating activities, negative.
Those are the items 1, 2, 3, 4 that
are going to show up on your cash flow statement.
We're going to do one more example.
And hopefully by then, you'll totally
understand how to do the T-account proof.