Chapter 14, Problem 1LO

To determine

Using indirect method prepare the operating activities section of the cash flow statement.

Explanation of Solution

Statement of cash flows:

Statement of cash flows reports all the cash transactions which are responsible for inflow and outflow of cash and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.

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. Examples: cash paid for salaries and cash received by selling goods.

The format to prepare cash flow of operating activities in indirect method is as follows:

Table (1)

The operating activities section of the cash flow statement is as follows:

Table (2)