Direct method: This method uses the basis of cash for preparing the cash flows of statement. Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year. A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable. B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid. To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

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Answer 1

Question

Chapter 12, Problem 22Q

To determine

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

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Answer 2

Question

Chapter 12, Problem 22Q

To determine

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

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Answer 3

Question

Chapter 12, Problem 22Q

To determine

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

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Answer 4

Question

Chapter 12, Problem 22Q

To determine

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 22Q

To determine

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

Answer 6

Chapter 12, Problem 22Q

To determine

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

Answer 7

Chapter 12, Problem 22Q

To determine

Direct method: This method uses the basis of cash for preparing the cash flows of statement.

Cash flows from operating activities: In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

A. Cash Receipts: It encompasses all the cash receipts from sale of goods and on account receivable.

B. Cash Payments: It encompasses all the cash payments that are made to suppliers of goods and all expenses that are paid.

To explain: the reason why depreciation expenses not reported in cash flow from operating activities under direct method.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 12 - Prob. 1Q Ch. 12 - Prob. 2Q Ch. 12 - Prob. 3Q Ch. 12 - Prob. 4Q Ch. 12 - Prob. 5Q Ch. 12 - Prob. 6Q Ch. 12 - Why is it necessary to use comparative balance...Ch. 12 - Prob. 8Q Ch. 12 - Prob. 9Q Ch. 12 - Prob. 10Q

Solution Summary: The author explains that the depreciation expense is not reported in cash flow from operating activities because it is a non-cash flow item.

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