Chapter 11, Problem 11.5BE

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 of cash flow from operating activities: 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

To prepare: The operating activities section of the statement of cash flow of Company M.