| Course | ACC 317 Intermediate Accounting I |
|---|---|
| Module | Module 3 |
| Paper type | undergraduate classified balance sheet and statement of cash flows (indirect method) |
| Length | About 1,020 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 317 Module 3
Where the Cash Went: A Classified Balance Sheet and Indirect-Method Statement of Cash Flows for a Composite Hot Tub Manufacturer
[Student Name]
Southern New Hampshire University
ACC 317: Intermediate Accounting I
Module Three Assignment
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Where the Cash Went: A Classified Balance Sheet and Indirect-Method Statement of Cash Flows for a Composite Hot Tub Manufacturer
Introduction
The income statement in Module Two showed net income of $3,776,250 for the hot tub manufacturer, but net income does not tell a lender whether the company can pay its bills. The balance sheet shows what the company owns and owes at year end, while the cash flow statement sorts the year's receipts and payments into operating, investing and financing groups. This assignment prepares a classified balance sheet at December 31 and a statement of cash flows using the indirect method, then interprets the gap between earnings and cash. Kieso et al. (2019) describe the cash flow statement as the link between the income statement and the change in balance sheet position, and the tie-out below is the test of that link.
Classified Balance Sheet
Table 1. Classified Balance Sheet, December 31
| Line | Amount |
|---|---|
| Cash | $1,753,250 |
| Accounts receivable, net of allowance of $400,000 | 8,420,000 |
| Inventories | 11,860,000 |
| Prepaid expenses | 310,000 |
| Total current assets | 22,343,250 |
| Available-for-sale debt securities | 1,620,000 |
| Property, plant and equipment, net of accumulated depreciation of $8,950,000 | 12,450,000 |
| Patents, net | 680,000 |
| Total assets | $37,093,250 |
| Accounts payable | $5,240,000 |
| Accrued liabilities | 1,870,000 |
| Warranty liability, current | 1,130,000 |
| Income taxes payable | 410,000 |
| Current portion of long-term debt | 1,400,000 |
| Total current liabilities | 10,050,000 |
| Long-term debt, less current portion | 7,200,000 |
| Warranty liability, noncurrent | 640,000 |
| Deferred income tax liability | 520,000 |
| Total liabilities | 18,410,000 |
| Common stock, $1 par, 2,500,000 shares | 2,500,000 |
| Additional paid-in capital | 3,100,000 |
| Retained earnings | 12,971,250 |
| Accumulated other comprehensive income | 112,000 |
| Total stockholders' equity | 18,683,250 |
| Total liabilities and stockholders' equity | $37,093,250 |
Two classification choices are worth explaining. The $1,400,000 of term loan principal due within twelve months is a current liability, even though the loan itself is long term, because it will be paid from current assets. The warranty liability is split the same way: the cost of claims expected in the coming year is current, and the rest of the multi-year coverage is noncurrent.
Statement of Cash Flows, Indirect Method
Table 2. Statement of Cash Flows for the Year
| Line | Amount |
|---|---|
| Net income | $3,776,250 |
| Depreciation expense | 1,420,000 |
| Loss on disposal of swim spa line | 360,000 |
| Gain on equipment sold | (85,000) |
| Increase in accounts receivable | (1,150,000) |
| Increase in inventories | (2,300,000) |
| Decrease in prepaid expenses | 40,000 |
| Increase in accounts payable | 610,000 |
| Increase in accrued and warranty liabilities | 230,000 |
| Net cash provided by operating activities | 2,901,250 |
| Purchase of equipment | (3,600,000) |
| Proceeds from sale of equipment | 240,000 |
| Proceeds from sale of swim spa line | 2,100,000 |
| Purchase of available-for-sale debt securities | (500,000) |
| Net cash used by investing activities | (1,760,000) |
| Proceeds from term loan | 1,000,000 |
| Repayment of long-term debt | (1,400,000) |
| Dividends paid | (900,000) |
| Net cash used by financing activities | (1,300,000) |
| Net decrease in cash | (158,750) |
| Cash, beginning of year | 1,912,000 |
| Cash, end of year | $1,753,250 |
Depreciation reduced income but drew no cash in the year, so it returns to the total. The $360,000 loss on the swim spa disposal is added back for the same reason: the cash effect of the sale, $2,100,000 in proceeds, appears in investing activities. The $85,000 gain on equipment is subtracted because the full $240,000 of proceeds is reported in investing; leaving the gain in operating cash would count it twice. Increases in receivables and inventory are subtracted because they tied up cash, while increases in payables and accrued liabilities are added because the company delayed paying for costs it had already expensed. Dividends are a financing activity under GAAP, and interest paid remains in operating activities.
Tie-Out and Noncash Activity
Operating, investing and financing activities together reduced cash by $158,750, from $1,912,000 to $1,753,250, which matches the balance sheet. Retained earnings also reconcile: the beginning balance of $10,095,000 plus net income of $3,776,250 less dividends of $900,000 equals $12,971,250. Accumulated other comprehensive income rose by the $42,000 of other comprehensive income from Module Two. There were no significant noncash investing or financing transactions to disclose this year. Had the company, for example, acquired equipment by signing a note directly with the seller, that purchase would appear in a separate disclosure rather than in the investing section, because no cash changed hands.
GAAP also requires supplemental disclosure of cash paid for interest and income taxes when the indirect method is used. Interest paid was $598,000, slightly less than interest expense because one payment fell after year end, and income taxes paid were $1,180,000, below total tax expense of $1,258,750 after the swim spa benefit, because part of the year's tax remained payable at December 31 and part was deferred. These figures help a lender judge whether the operating total is driven by timing.
What the Gap Between Earnings and Cash Means
Operating cash flow of $2.9 million was about 77 percent of net income, and well below income from continuing operations. The difference comes almost entirely from working capital: receivables rose $1.15 million as dealers took longer to pay, and inventory rose $2.3 million as the company stocked shells and parts ahead of a spring price increase. Neither is necessarily a problem, but both deserve questions. Sloan (1996) found that earnings driven by large accruals tend to be less persistent than earnings backed by cash, and Dechow (1994) showed that the accrual component makes earnings a better performance measure on average but a noisier one when working capital swings are large. A lender would ask whether the receivables increase reflects slower-paying dealers, a question the Module Five allowance analysis takes up, and whether the inventory build will turn into sales.
The balance sheet supports a reasonably strong position nonetheless. The current ratio is 2.22, working capital is about $12.3 million, and total liabilities roughly equal equity. Investing activities show the company reinvested the swim spa proceeds in new equipment for its core product, consistent with the strategic shift.
Conclusion
The manufacturer ends the year with $37.1 million in assets, a current ratio of 2.22 and debt roughly equal to equity. Operating activities generated $2,901,250, less than net income because receivables and inventory grew. Investing activities used $1,760,000 after the swim spa sale, and financing used $1,300,000 for loan repayment and dividends, leaving cash $158,750 lower. The statements tie together and point to working capital as the item to watch.
References
Dechow, P. M. (1994). Accounting earnings and cash flows as measures of firm performance: The role of accounting accruals. Journal of Accounting and Economics, 18(1), 3-42. https://doi.org/10.1016/0165-4101(94)90016-7
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
Sloan, R. G. (1996). Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review, 71(3), 289-315. https://doi.org/10.2308/tar-9608042309
What the ACC 317 Module 3 instructions ask for
The Module Three assignment in ACC 317 usually provides comparative balance sheets, an income statement and additional information about transactions, and asks for a classified balance sheet and a statement of cash flows. Expect to classify assets and liabilities as current or noncurrent, group equity correctly, and prepare operating activities by the indirect method, starting with net income and adjusting for noncash items, gains and losses, and changes in working capital. Investing and financing activities must be separated and significant noncash transactions disclosed. Many versions ask you to interpret the results, for example by comparing operating cash flow with net income or computing liquidity ratios. Show the reconciliation to the change in cash.
How this ACC 317 Module 3 balance sheet and cash flow assignment example is built
The sample presents a classified balance sheet with current assets of $22.3 million, long-term investments, property and equipment, a patent, current and long-term liabilities and equity including accumulated other comprehensive income. The cash flow statement starts from net income of $3,776,250, adds back depreciation of $1,420,000 and the $360,000 loss on the swim spa disposal, subtracts the $85,000 gain on equipment, and adjusts for changes in receivables, inventory, prepaid costs, payables and accrued warranties, giving operating cash flow of $2,901,250. Investing activities use $1,760,000 net, and financing activities use $1,300,000. The $158,750 decrease ties to the cash balances. A closing section explains why operating cash trailed earnings.
Where the ACC 317 Module 3 rubric puts the points
Rubrics for the ACC 317 balance sheet and cash flow assignment generally award points for correct classification on the balance sheet, correct operating adjustments under the indirect method, correct investing and financing sections, a reconciliation to the change in cash and the written interpretation. Top papers adjust for gains and losses so that proceeds appear only in investing activities, apply the right sign to each working capital change, and keep dividends in financing. Graders often deduct for counting the full sale proceeds of equipment in operating activities, for reversing the sign on changes in current assets and for leaving out the noncash disclosure. A correct tie-out to the cash balance is usually the first thing a grader checks.
ACC 317 Module 3 help: the mistakes that cost points
Students most often lose points here by reversing signs on working capital changes, adding an increase in receivables instead of subtracting it, by putting a gain on sale in investing as well as leaving it in net income, and by classifying the current portion of long-term debt as long term. Another common gap is skipping interpretation. If your problem uses the direct method, includes noncash investing and financing transactions or requires a worksheet, send it and the paper will follow that format. Before writing any interpretation, confirm that beginning cash plus the net change equals ending cash on the balance sheet; if not, recheck each working capital line before anything else.
Get ACC 317 Module 3 written to your instructions
Send the ACC 317 Module 3 problem with its comparative balances and income data. The paper will classify the balance sheet, build the indirect cash flow statement line by line, tie it to the change in cash and explain what the gap between earnings and cash means. The first one costs nothing and is typically ready in two days. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
More ACC 317 papers and related BS Accounting samples
- ACC 317 Module 1 Discussion: A Heater Defect and the Conceptual Framework
- ACC 317 Module 2 Income Statement Assignment: Discontinued Operations and Comprehensive Income
- ACC 317 Module 4 Project One: Five Steps for a Resort Contract Under ASC 606
- ACC 311 Module 1 Discussion: Why a City Bid Needs a Real Cost Number
- ACC 201 Module 8 Accounting Ethics Discussion
- QSO 340 Module 3 Project One Project Plan
- BUS 210 Module 4 Motivation Assignment
ACC 317 Module 3 questions, answered
Where can I find a free ACC 317 Module 3 balance sheet and cash flow sample?
This page includes a complete ACC 317 Module 3 assignment with a classified balance sheet and an indirect-method cash flow statement that ties out.
How does the indirect method calculate operating cash flow?
It starts with net income, adds back noncash expenses such as depreciation, removes gains and losses on investing activities and adjusts for changes in current assets and current liabilities.
Why is a gain on the sale of equipment subtracted in operating activities?
The gain is included in net income, but the full cash proceeds are reported in investing activities. Subtracting the gain prevents counting it twice.
Where do dividends paid appear in the statement of cash flows?
Under GAAP, dividends paid are a financing activity. Interest paid, by contrast, is an operating activity.
What is a classified balance sheet?
A balance sheet that groups assets and liabilities into current and noncurrent categories, and often into subgroups such as investments and property, plant and equipment.