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Statement of
Cash flows from operating activities: Cash flows from operating activity represent the net cash flows from the general operation of the business by comparing the cash receipt and cash payments.
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.
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 |
To Compute: Cash flows from operating activities under indirect method.
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Chapter 14 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters, Student Value Edition (5th Edition)
- Mahoney Company has the following financial statements for 2017 and 2018. Assume that the purchase of equipment and the withdrawals were in the form of cash. Required Prepare a statement of cash flows for the year ended December 31, 2018. Check Figure Net cash flows from operating activities, 76,800arrow_forwardFinancial data for Otto Company follow: a. Compute the ratio of cash to monthly cash expenses. b. Interpret the results computed in (a).arrow_forwardSmoltz Company reported the following information for the current year: cost of goods sold, $252,500; increase in inventory, $21,700; and increase in accounts payable, $12,200. What is the amount of cash paid to suppliers that Smoltz would report on its statement of cash flows under the direct method? a. $218,600 c. $262,000 b. $243,000 d. $286,400arrow_forward
- The accounting records of MVD Sales, Inc. include the following accounts: (Click the icon to view the accounts.) Compute MVD's net cash provided by (used for) operating activities during July 2016. Use the indirect method. (Use parentheses or a minus sign for numbers to be subtracted and to show net cash used for operating activities. If a box is not used in the table leave the box empty; do not select a label or enter a zero.) MVD Sales, Inc. Statement of Cash Flows (Partial) For the Month Ended July 2016 Cash Flows from Operating Activities: Net Income Adjustments to Reconcile Net Income to Net Cash Provided by (Used for) Operating Activities: Net Cash Provided by (Used for) Operating Activities Account Cash Accounts Receivable Merchandise Inventory Accounts Payable Beginning Balance $ 5,500 19,000 17,000 13,000 Accumulated Depreciation- Equipment 50,000 Jul. 1 3,000 Depr. Exp. 53,000 Jul. 31 Dividends Ending Balance $ 3,500 15,500 21,000 17,500 Retained Earnings 20,000 65,000 Jul. 1…arrow_forwardThe following items appeared on the financial statements of Washington Company. Line Item Description Amount Accounts receivable, January 1 $13,084 Accounts receivable, December 31 6,949 Accounts payable, January 1 5,909 Accounts payable, December 31 9,591 Inventory, January 1 8,120 Inventory, December 31 16,988 Sales 64,741 Cost of goods sold 32,521 Washington Company uses the direct method to report cash flows from (used for) operating activities. Assume that all accounts payable are owed to merchandise suppliers Cash received from customers during the year isarrow_forwardThe following items appeared on the financial statements of Washington Company. Line Item Description Amount Accounts receivable, January 1 $13,395 Accounts receivable, December 31 6,901 Accounts payable, January 1 5,645 Accounts payable, December 31 8,721 Inventory, January 1 6,686 Inventory, December 31 16,260 Sales 73,071 Cost of goods sold 34,443 Washington Company uses the direct method to report cash flows from (used for) operating activities. Assume that all accounts payable are owed to merchandise suppliers. Cash payments for merchandise werearrow_forward
- Hamburger Heaven's income statement for the current year and selected balance sheet data for the current and prior years ended December 31 are presented below. Income Statement $2,280 Sales Revenue Expenses: Cost of Goods Sold 950 Depreciation Expense Salaries and Wages Expense 250 550 Rent Expense 300 Insurance Expense 85 Interest Expense Utilities Expense 65 55 Net Income 25 Selected Balance Sheet Accounts Prior Year Current Year Inventory 92 65 405 500 Accounts Receivable Accounts Payable Salaries/Wages Payable Utilities Payable Prepaid Rent Prepaid Insurance 225 260 39 25 25 70 4 11 13 TIP: Prepaid Rent decreased because the amount taken out of Prepaid Rent (and subtracted from net income as Rent Expense) was more than the amount paid for rent in cash during the current year. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. TIP: Convert the cost of goods sold to cash paid to suppliers by adding the increase…arrow_forwardPreparing the Statement of Cash Flows: Indirect Method E8A. Keeper Corporation's income statement for the year ended June 30, 2014, and its comparative balance sheets for June 30, 2014 and 2013 follow. Keeper Corporation Income Statement For the Year Ended June 30, 2014 Sales Cost of goods sold Gross margin Operating expenses Operating income Interest expense Income before income taxes Income taxes expense Net income Assets Keeper Corporation Comparative Balance Sheets June 30, 2014 and 2013 Cash Accounts receivable (net) Inventory Prepaid expenses Furniture Accumulated depreciation-furniture Total assets Liabilities and Stockholders' Equity Accounts payable Income taxes payable Notes payable (long-term) Common stock, $10 par value Retained earnings Total liabilities and stockholders' equity 2014 $ 69,900 21,000 43,400 3,200 55,000 (9,000) $183,500 $ 13,000 1,200 37,000 115,000 17,300 $183,500 $234,000 156,000 $ 78,000 45,000 $ 33,000 2,800 $ 30,200 12,300 $ 17,900 2013 $ 12,500 26,000…arrow_forwardThe following selected account balances appeared on the financial statements of Washington Company: Accounts Receivable, January 1 $16,126 Accounts Receivable, December 31 7,405 Accounts Payable, January 1 5,111 Accounts Payable, December 31 7,854 Merchandise Inventory, January 1 7,084 Merchandise Inventory, December 31 16,812 Sales 66,012 Cost of Merchandise Sold 33,620 Washington Company uses the direct method to calculate net cash flow from operating activities. Cash payments for merchandise were a.$72,997 b.$21,149 c.$46,091 d.$40,605arrow_forward
- The following selected account balances appeared on the financial statements of Washington Company: Accounts Receivable, January 1 Accounts Receivable, December 31 Accounts Payable, January 1 Accounts Payable, December 31 $14,013 6,449 5,841 7,294 10,420 15,188 Sales 62,580 Cost of Merchandise Sold 36,279 Washington Company uses the direct method to calculate net cash flow from operating activities. Cash payments for merchandise were Merchandise Inventory, January 1 Merchandise Inventory, December 31 a. $42,500 Ob. $30,058 c. $39,594 Od. $65,895 Check My Work 1 more Check My Work uses remaining. Previousarrow_forwardThe following selected account balances appeared on the financial statements of Washington Company: Accounts Receivable, January 1 $15,102 Accounts Receivable, December 31 7,937 Accounts Payable, January 1 5,381 Accounts Payable, December 31 9,511 Merchandise Inventory, January 1 9,855 Merchandise Inventory, December 31 15,185 Sales 68,703 Cost of Merchandise Sold 32,106 Washington Company uses the direct method to calculate net cash flow from operating activities. Cash collections from customers werearrow_forwardReporting Net Cash Flow from Operating Activities The following information is available for Cornelius Inc.: Selected Income Statement Information Amount Net income $52,000 Depreciation expense 11,300 Selected Balance Sheet Information Beginning Balance Ending Balance Accounts receivable $11,500 $17,650 Inventory 33,800 27,825 Accounts payable 15,900 24,600 Required: Prepare the net cash flows from operating activities using the indirect method. Use a minus sign to indicate any decreases in cash or cash flows. Cornelius Inc.Net Cash Flows from Operating ActivitiesUsing Indirect Method Cash flows from operating activities: $- Select - Adjustments to reconcile net income to net cash flow from operating activities: $- Select - - Select - - Select - - Select - Net cash provided by operating activities $fill in the blank 11arrow_forward
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