Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.
Indirect method: Under this method, the following amounts are to be adjusted from the Net Incometo calculate the net cash provided from operating activities.
Cash flows from operating activities: These are the cash produced by the normal business operations.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Indirect method) |
Add: Decrease in current assets |
Increase in current liability |
|
Loss on sale of plant assets |
Deduct: Increase in current assets |
Decrease in current liabilities |
Gain on sale of plant assets |
Net cash provided from or used by operating activities |
Table (1)
To Compute: Net cash flows from operating activities under indirect method.
Want to see the full answer?
Check out a sample textbook solutionChapter 13 Solutions
Financial and Managerial Accounting - With CengageNow
- Adjustments to Net Income—Indirect Method Ripley Corporation’s accumulated depreciation—equipment account increased by $15,325 while $3,800 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $22,420 from the sale of investments. Reconcile a net income of $286,900 to net cash flow from operating activities.$fill in the blank 1arrow_forwardAdjustments to Net Income-Indirect Method Kingston Corporation's accumulated depreciation-equipment account increased by $7,600 while $4,900 of patent amortization was balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income st $5,800 from the sale of investments. Reconcile a net income of $86,400 to net cash flow from operating activities.arrow_forwardAdjustments to Net Income—Indirect Method Lighthouse Corporation's accumulated depreciation—equipment account increased by $8,900, while $5,800 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $6,800 from the sale of investments. Reconcile a net income of $101,000 to net cash flow from operating activities.$arrow_forward
- Adjustments to Net Income—Indirect Method Omni Corporation's accumulated depreciation—equipment account increased by $8,800, while $5,700 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $6,700 from the sale of investments. Reconcile a net income of $99,600 to net cash flows from operating activities.$fill in the blank 1arrow_forwardAdjustments to Net Income—Indirect Method Lighthouse Corporation's accumulated depreciation equipment account increased by $6,300 while $4,100 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $4,800 from the sale of investments. Reconcile a net income of $71,500 to net cash flow from operating activities.$arrow_forwardAdjustments to Net Income—Indirect Method Omni Corporation's accumulated depreciation—equipment account increased by $4,300 while $2,800 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $3,300 from the sale of investments. Reconcile a net income of $49,200 to net cash flow from operating activities.arrow_forward
- Adjustments to Net Income—Indirect Method Nadal Corporation’s accumulated depreciation—furniture account increased by $17,720, while $3,800 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $5,200 from the sale of land. Reconcile a net income of $343,700 to net cash flows from operating activities.$arrow_forwardRipley corporarion's accumulated depreciation - equipment account increased by 15325 while 3800 of patent amortization was recognized bewtween balance sheet dates. There were no purchases of sales of depreciation or intangible assets during the year. In addition the income statement showed a gain of 22420 from the salem of investments. Reconcile a net income of 286900 to net cash flow from operetatimg activitiesarrow_forwardCash Flows from (Used for) Operating Activities The income statement disclosed the following items for the year: Depreciation expense $42,700 Gain on disposal of equipment 24,890 Net income 328,300 The changes in the current asset and liability accounts for the year are as follows: Increase (Decrease) Accounts receivable $6,650 Inventory (3,780) Prepaid insurance (1,420) Accounts payable (4,510) Income taxes payable 1,420 Dividends payable 1,000 a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial)arrow_forward
- Cash Flows from (Used for) Operating Activities The income statement disclosed the following items for the year: Depreciation expense $44,100 Gain on disposal of equipment 25,740 Net income 339,800 The changes in the current asset and liability accounts for the year are as follows: Increase(Decrease) Accounts receivable $6,870 Inventory (3,910) Prepaid insurance (1,470) Accounts payable (4,660) Income taxes payable 1,470 Dividends payable 1,030 Question Content Area a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. blankStatement of Cash Flows (partial) Cash flows from (used for) operating activities: $- Select - Adjustments to reconcile net income to net cash flows from (used for) operating activities: - Select -…arrow_forwardEastlund Corporation's accumulated depreciation—equipment account increased by $6,320, while $2,450 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $13,510 from the sale of investments. Reconcile a net income of $126,300 to net cash flows from operating activities.$fill in the blank 1arrow_forwardCash Flows from Operating Activities—Indirect Method The income statement disclosed the following items for the year: Depreciation expense $44,700 Gain on disposal of equipment 26,060 Net income 394,500 The changes in the current asset and liability accounts for the year are as follows: Increase(Decrease) Accounts receivable $6,960 Inventory (3,960) Prepaid insurance (1,490) Accounts payable (4,720) Income taxes payable 1,490 Dividends payable 1,040 a. Prepare the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,