![Horngren's Financial & Managerial Accounting, The Financial Chapters, Student Value Edition (5th Edition)](https://www.bartleby.com/isbn_cover_images/9780133851731/9780133851731_largeCoverImage.gif)
1.
Statement of
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.
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 |
Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.
Cash flows from investing activities |
Add: Proceeds from sale of fixed assets |
Sale of marketable securities / investments |
Interest received |
Dividend received |
Deduct: Purchase of fixed assets/long-lived assets |
Purchase of marketable securities |
Net cash provided from or used by investing activities |
Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.
Cash flows from financing activities |
Add: Issuance of common stock |
Proceeds from borrowings |
Proceeds from issuance of debt |
Deduct: Payment of dividend |
Repayment of debt |
Interest paid |
Redemption of debt |
Purchase of |
Net cash provided from or used by financing activities |
Non-Cash Transaction:
The transaction, which does not involve any cash dealings, is known as non-cash transactions. In these type transactions there will not be any inflow or outflow of cash. Simply put, the transaction, which does not have an impact on the inflow or outflow of cash, is called as non-cash transactions.
Examples of significant non-cash transactions are stated below:
- Issue of common stock to retire long-term debt.
- Purchase of machinery by issuing notes payable
- Issuance of common stock for purchase of land
To Prepare: Statement of cash flows for the year 2016 (Using indirect method).
2.
To Analyze: The statement of cash flows to get help for evaluating an investment.
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Chapter 14 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters, Student Value Edition (5th Edition)
- (Statement Presentation of Transactions—Indirect Method) Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended December 31, 2017.(a) Plant assets that had cost $20,000 6 years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for $5,300.(b) During the year, 10,000 shares of common stock with a stated value of $10 a share were issued for $43 a share.(c) Uncollectible accounts receivable in the amount of $27,000 were written off against Allowance for Doubtful Accounts.(d) The company sustained a net loss for the year of $50,000. Depreciation amounted to $22,000, and a gain of $9,000 was realized on the sale of land for $39,000 cash.(e) A 3-month U.S. Treasury bill was purchased for $100,000. The company uses a cash and cash equivalent basis for its cash flow statement.(f) Patent amortization for the year was $20,000.(g) The company…arrow_forwardUsing a spreadsheet to prepare the statement of cash flows—indirect method The 2018 comparative balance sheet and income statement of Appleton Group, Inc. follow. Appleton disposed of a plant asset at book value during 2018. Prepare the spreadsheet for the 2018 statement of cash flows. Format cash flows from operating activities by the indirect method. A plant asset was disposed of for $0. The cost and accumulated depredation of the disposed asset was $11,600. There were no sales of land, no retirement of common stock, and no treasury stock transactions. Assume plant asset and land acquisitions were for cash.arrow_forwardOn its January 1, 2016, balance sheet, Calvin Company reported equipment of $60,000 and accumulated depreciation of $20,000. During 2016, Calvin sold equipment with an original cost of $5,000. Selected information from Calvin's 2016 statement of cash flows follows: Net income $20,000 Depreciation expense on equipment 2,000 Gain on sale of equipment 600 Proceeds from sale of equipment 1,500 Purchase of equipment 18,000 Required:Compute the amount of equipment and accumulated depreciation that should appear on Calvin's December 31, 2016, balance sheet.arrow_forward
- Using a spreadsheet to prepare the statement of cash flows—indirect method The 2018 comparative balance sheet and income statement of Attleboro Group, Inc. follow. Attleboro disposed of a plant asset at book value in 2018. Prepare the spreadsheet for the 2018 statement of cash flows. Format cash flows from operating activities by the indirect method. A plant asset was disposed of for $0. The cost and accumulated depreciation of the disposed asset was $13,600. There were no sales of land, no retirement of common stock, and no treasury stock transactions. Assume plant asset and land acquisitions were for cash.arrow_forwardCalculate free cash flow for 2017 for Monarch Textiles, Inc., based on the financial information that follows. Assume that all current liabilities and that no fixed assets were sold or disposed of during 2017. (Round your answer to 1 liabilities are non-interest-bearing decimal places.) Sales Cost of sales Operating expenses Depreciation Income statement Interest expense Earnings before taxes Tax Net income Free cash flow Monarch Textiles, Inc. ($ thousands) 2017 1,250 750 125 60 50 265.00 106.00 159.00 Selected balance sheet items Current assets Net fixed assets Current liabilities 2016 350 120 225 2017 475 240 305arrow_forwardPrepare the company's statement of cash flows indirect method for the year ended December 31, 2024. Assume investments are purchased with cash. (Use a minus sign or parentheses for amounts that result in a decrease in cash. It a box is not used in the statement leave the box empty; do not select a label or enter a zero.) More info Superior calculated the following amounts for 2024: • Acquisition value of plant assets, $89,000. • Payment of dividends, $102,000. • Payment of long-term notes payable, $3,000. • Cash receipt from issuance of common stock. $15.000. Superior Exercise disposed of plant assets at book value. The cost and accumulated depreciation of the disposed asset was $43 500. No cash was received upon disposalarrow_forward
- Current Attempt in Progress Presented below are a number of balance sheet items for Culver, Inc. for the current year, 2017. Goodwill $ 211,800 Accumulated depreciation-equipment $ 467,100 Payroll taxes payable 67,100 Inventory 400,400 Bonds payable 501,800 Rent payable (short-term) 41,800 Discount on bonds payable 35,100 Income tax payable 112,600 Cash 62,800 Rent payable (long-term) 81,800 Land 352,800 Common stock, $1 par value 251,800 Notes receivable 162,300 Preferred stock, $25 par value 1,251,800 Notes payable (to banks) 266,700 Prepaid expenses 70,560 Accounts payable 348,800 Equipment 1,387,800 Retained earnings ? Equity investments (trading) 376,800 Income taxes receivable 47,400 Accumulated depreciation-buildings 361,300 Unsecured notes payable (long-term) 1,301,800 Buildings 2,801,800 Prepare a classified…arrow_forwardCemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2016 fiscal year was $624,000. Depreciation and amortization expense of $87,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Required: Prepare the operating activities section of the 2016 statement of cash flows.arrow_forwardInserting into the Answer Box, prepare a statement of cash flows for the year ended December 31, 2019, using the Indirect method for Presidio, Co. Extracts from the 2019 financial records of the Presidio, Co.: Additional information: During 2019, the company sold a piece of plant equipment for cash that had originally cost $20,000. The accumulated depreciation associated with the equipment at the time of sale was $10,000. There was no gain or loss on the sale. A Long-Term Stock Investment with an original cost of $11,000 was sold. All dividends were paid in cash during the year. Copy and Paste the Statement template below INTO your Answer Box in order to complete this question in the correct format. Cash flows from operating activities: Cash flows from investing activities: Cash flows from financing activities: Net increase/<decrease> in cash & cash equivalents Beginning cash balance, January 1, 2019…arrow_forward
- Using the financial statements and additional information below, prepare a cash flow statement for Papa Ltd for the year ended 31st December 2018 using the indirect method of calculating operating cash flow and write a brief comment on the cash flow for the period. Papa Ltd Statement of Profit or Loss Account for the year ended 31st December 2018 GHC Revenue 540,000 Cost of sales (155,000) Gross profit 385,000 Investment income – interest received 15,000 Loss on disposal of equipment (18,000) Depreciation (94,000) Administrative and selling expenses (25,000) Operating profit before interest 263,000 Interest expense (10,000) Profit before taxation 253,000 Taxation (56,000) Profit after tax 197,000 Statement of financial position as at 31st December 2018 2017 GHC GHC Non-current assets Vehicle at cost 180,000 150,000 Accumulated depreciation (137,000)…arrow_forwardREQUIRED Study the statement of cash flows of Mantis Limited for the year ended 31 December 2021 and answer the following questions: Calculate the following for the year ended 31 December 2021: Depreciation Dividends paid Of what significance is this statement of cash flows to the shareholders of Mantis Limited? Comment on the following: Cash flows from operating activities (R181 800) 1.3.2. Increase in inventory (R808 000) Increase in receivables (R606 000) Interest paid (R80 800) Cash flows from investing activities (R2 343 200) INFORMATION MANTIS LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021 R Cash flows from operating activities (181 800) Operating profit 979 700 Depreciation ? Profit before working capital changes ? Working capital changes (808 000) Increase in inventory (808 000) Increase in receivables…arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305654174/9781305654174_smallCoverImage.gif)