1. Explanation 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 are the cash produced by the normal business operations. 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. The statement of cash flow of M Corporation (using indirect method) for the year ended 2018 is prepared as follows: Corporation M Statement of Cash Flows Year Ended December 31, 2018 Particulars $ $ Cash flows from operating activities: Net income $58,800 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $14,600 Decrease in accounts receivable 5,000 Increase in inventories -1,200 Decrease in prepaid expenses 3,200 Increase in accounts payable 4,700 Increase in salary payable 8,000 Decrease in other accrued liabilities -3,200 31,100 Net cash provided by operating activities 89,900 Cash flows from investing activities: Purchase of land -38,000 Purchase of equipment -28,400 Net cash used for investing activities -66,400 Cash flows from financing activities: Payment of dividends -53,700 Issuance of note payable 22,000 Issuance of common stock 24,800 Net cash used for financing activities -6,900 Net increase in cash and cash equivalents $16,600 Cash balance as on December 31, 2017 1,000 Cash balance as on December 31, 2018 $17,600 Table (1) ... 2. To determine To evaluate: The Usefulness of cash flows statement.

Financial Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition)

12th Edition

ISBN: 9780134833132

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

See similar textbooks

Question

Chapter 11, Problem 11.70BP

To determine

To prepare: The company’s statement of cash flows for the year ended 2018 using the indirect method.

To determine

To evaluate: The Usefulness of cash flows statement.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 11, Problem 11.69BP

Chapter 11, Problem 11.71BP

Students have asked these similar questions

Below are several transactions for Meyers Corporation for 2021.Required: 1. For each transaction, determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”). If cash is involved in the transaction, indicate whether Meyers should classify it as operating, investing, or financing in a statement of cash flows. Enter N/A if the question is not applicable to the statement. 2. Calculate net cash flows for the year. 3. Assuming the balance of cash on January 1, 2021, equals $5,400, calculate the balance of cash on December 31, 2021.

Prepare Morganson's statement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities. P16-34A Preparing the statement of cash flows-indire ct method with The 2018 income statement and comparative balance shect of Rolling Hills, Inc. non-cash transactions follow ROLLING HILLS, INC. Income Statement Year Ended December 31, 2018 Net Sales Revenue $ 440,000 Cost of Goods Sold 209,200 Gross Profit 230,800 Operating Expenses: Salaries Expense $ 77,400 Depreciation Expense-Plant Assets 14,400 Other Operating Expenses 10,200 Total Operating Expenses 102,000 Operating Income 128,800 Other Income and (Expenses): Interest Revenue 8,700 Interest Expense (21,100) Total Other Income and (Expenses) (12,400) Net Income Before Income Taxes 116,400 Income Tax Expense 20,000 $ 96,400 Net Income

Preparing the statement of cash flows —indirect method, evaluating cash flows, and measuring free cash flows The comparative balance sheet of Robeson Educational Supply at December 31, 2018, reported the following: Robeson’s transactions during 2018 included the following: Requirements Prepare the statement of cash flows of Robeson Educational Supply for the year ended December 31, 2018. Use the indirect method to report cash flow, from operating activities. Evaluate Robeson’s cash flows for the year. Mention all three categories of cash flows, and give the reason for your evaluation. If Robeson plans similar activity for 2018, what is its expected free cash flow?

Chapter 11 Solutions

Financial Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition)

Ch. 11 - Quick Check (Answers are given here) The statement...Ch. 11 - Prob. 2QC Ch. 11 - Prob. 3QC Ch. 11 - Which of the three types of activities reported on...Ch. 11 - Prob. 5QC Ch. 11 - On the statement of cash flows, which of the...Ch. 11 - On the statement of cash flows, which of the...Ch. 11 - Prob. 8QC Ch. 11 - Prob. 9QC Ch. 11 - Which of the following transactions does not...

Knowledge Booster

The company’s statement of cash flows for the year ended 2018 using the indirect method.

Solution Summary: The author explains the indirect method used to prepare the company's statement of cash flows for the year ended 2018.

To prepare: The company’s statement of cash flows for the year ended 2018 using the indirect method.

To evaluate: The Usefulness of cash flows statement.

Want to see the full answer?

Chapter 11 Solutions