Accounting Challenge 11.1

Accounting Decision Files

Following the Cash: Preparing and Interpreting the Statement of Cash Flows

About this activity

Campus Cycle Repair · you gather the facts by interviewing, not by reading a handout.

Campus Cycle Repair's cash balance has moved over the period, and Riley has a theory about why. Net income explains part of it. The rest comes from operating changes, equipment purchases, and financing — and until those are separated, nobody can say whether the business is generating cash or merely holding some. Your job is to trace where the cash actually came from and went.

Watch the tutorial video

Length: 8 minutes, 12 seconds

Open the tutorial video in a new window

Interview Riley and Morgan

Neither character has the whole picture. Morgan can tell you what the records show; Riley can tell you why. Ask real questions, follow up on anything that does not add up, and reconcile the two accounts before you answer anything.

Riley — founder and owner. Knows the business story and what actually happened, but does not keep the books. Optimistic, cautious about debt, and candid when working from memory.
Interview Riley

Morgan — handled the accounting records. Organized, practical, and precise. Morgan knows what was recorded and how.
Interview Morgan

Questions worth asking

You may ask your own questions. These will get you started.

Riley, the company was profitable this year, so why did the cash balance fall? What did the company spend money on?
Riley, what did the company buy this year, and what did it sell? How much cash came in from selling the old equipment?
Riley, how did the company raise money this year, and what did it pay out for debt and dividends?
Riley, tell me about the new delivery equipment. How was it paid for, and how is that different from the money the company borrowed?
Morgan, how does the operating section start under the indirect method, and what are the first adjustments to net income? Then follow up to gather the remaining noncash items and current-account changes, and note which are added and which are subtracted.
Morgan, what were the beginning and ending cash balances, and what was the gain and the book value on the equipment that was sold?
Riley and Morgan, were there any transactions that were only discussed, quoted, or proposed but not actually completed this year? Was anything not tracked?
Based on what you learned, why did cash fall during a profitable year, and what evidence matters most in deciding whether the company could take on a major expansion?

Then answer in Canvas

The questions are in Canvas, in the quiz named Accounting Challenge 11.1.

Interview both characters before you start the quiz.
The questions ask about evidence you gather in the interviews, so the tutorial video alone will not be enough.
You have one attempt, and you will get 5 questions.
Questions appear one at a time, and you cannot return to a question after you submit it.
Keep this page open in a second window so you can go back to an interview while you work.
Do not paste quiz questions into the interviews. Gather facts, then reason from them.

If something does not work

Email Dr. Tietz at wtietz@kent.edu with your section number and what happened. Do not wait until the due date has passed.