Statement of
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.
A cash flow statement includes the following three components.
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.
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 |
Net cash provided from or used by financing activities |
To Prepare: The statement of cash flows under indirect method.
Want to see the full answer?
Check out a sample textbook solutionChapter 14 Solutions
ACC 201/202 MYACCLAB E-TEXT ONLY >I<
- Use the following excerpts from OpenAir Companys financial information to prepare a statement of cash flows (indirect method) for the year 2018.arrow_forwardUse the following excerpts from Mountain Companys financial information to prepare a statement of cash flows (indirect method) for the year 2018.arrow_forwardThe comparative balance sheet of Whitman Co. at December 31, 2016 and 2015, is as follows: The noncurrent asset, noncurrent liability, and stockholders equity accounts for 2016 are as follows: Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.arrow_forward
- Use the following excerpts from Kayak Companys financial information to prepare the operating section of the statement of cash flows (indirect method) for the year 2018.arrow_forwardUse a spreadsheet and the following financial information from Mineola Companys financial statements to build a template that automatically calculates the net operating cash flow. It should be suitable for use in preparing the operating section of the statement of cash flows (indirect method) for the year 2018.arrow_forwardUse the following information from Birch Companys balance sheets to determine net cash flows from operating activities (indirect method), assuming net income for 2018 of $122,000.arrow_forward
- Use the following information from Juniper Companys financial statements to prepare the operating activities section of the statement of cash flows (indirect method) for the year 2018.arrow_forwardStatement of cash flowsindirect method The comparative balance sheet of Coulson, Inc. at December 31, 20Y2 and 20Y1, is as follows: The noncurrent asset, noncurrent liability, and stockholders equity accounts for 20Y2 are as follows: Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.arrow_forwardUse the following information from Coconut Companys financial statements to prepare the operating activities section of the statement of cash flows (indirect method) for the year 2018.arrow_forward
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning