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Partial Statement of Cash Flows Service Company had net income during the current year of $65,800. The following information was obtained from Service’s balance sheet: Accounts receivable $26,540 increase Inventory 32,180 increase Accounts payable 9,300 decrease Interest payable 2,120 increase Accumulated depreciation (Building) 14,590 increase Accumulated depreciation (Equipment) 32,350 increase Additional Information: 1. Equipment with accumulated depreciation of $18,000 was sold during the year. 2. Cash dividends of $29,625 were paid during the year. Required: 1. Prepare the net cash flows from operating activities using the indirect method. 2. CONCEPTUAL CONNECTION How would the cash proceeds from the sale of equipment he reported on the statement of cash flows? 3. CONCEPTUAL CONNECTION How would the cash dividends be reported on the statement of cash flows? 4. CONCEPTUAL CONNECTION What could the difference between net income and cash flow from operating activities signal to financial statement users?

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881
BuyFind

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

Solutions

Chapter
Section
Chapter 11, Problem 45E
Textbook Problem

Partial Statement of Cash Flows

Service Company had net income during the current year of $65,800. The following information was obtained from Service’s balance sheet:

Accounts receivable $26,540 increase

Inventory 32,180 increase

Accounts payable 9,300 decrease

Interest payable 2,120 increase

Accumulated depreciation (Building) 14,590 increase

Accumulated depreciation (Equipment) 32,350 increase

Additional Information:

1. Equipment with accumulated depreciation of $18,000 was sold during the year.

2. Cash dividends of $29,625 were paid during the year.

Required:

1. Prepare the net cash flows from operating activities using the indirect method.

2. CONCEPTUAL CONNECTION How would the cash proceeds from the sale of equipment he reported on the statement of cash flows?

3. CONCEPTUAL CONNECTION How would the cash dividends be reported on the statement of cash flows?

4. CONCEPTUAL CONNECTION What could the difference between net income and cash flow from operating activities signal to financial statement users?

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Chapter 11 Solutions

Cornerstones of Financial Accounting
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