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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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The following financial statements were provided by Roberts Company:

Chapter 14, Problem 46P, The following financial statements were provided by Roberts Company: At the end of 20X2, Roberts , example  1

Chapter 14, Problem 46P, The following financial statements were provided by Roberts Company: At the end of 20X2, Roberts , example  2

At the end of 20X2, Roberts purchased some additional equipment for $20,000.

Required:

Prepare a statement of cash flows using the indirect method.

To determine

Chart the statement of cash flows using the indirect method.

Explanation

Cash Flow Statement:

Cash flow statement is a financial statement prepared to provide information about the sources and uses of cash in a firm. In this statement, the activities increasing cash are referred as cash inflows and the activities that decrease cash are referred as cash outflows. Financing and investing activities are two category of a cash flow statement.

The statement of cash flows for R Company for 20X2 using indirect method is shown below:

R Company
Statement of Cash Flows
For the year ended September 30, 20X2
ParticularsAmount ($) 
Cash flows from operating activities: Amount ($)
Net loss(800) 
Add/ Less:  
    Increase in accounts receivable1(2,000) 
    Decrease in inventories22,800 
    Decrease in accounts payable3(1,600) 
    Decrease in wages payable4(400) 
    Depreciation expense56,000 
        Net cash from operating activities 4,000
Cash flows from investing activities:
    Purchase of equipment(20,000) 
        Net cash from investing activities (20,000)
Net decrease in cash (16,000)

Table (1)

Therefore, there is a net decrease in cash of $16,000.

Working Note:

1.

Calculation of difference in accounts receivable:

(DifferenceinAccountsReceivable)=(AmountofAccountsReceivableof20X2AmountofAccountsReceivableof20X1)=($9,600$7,600)=$2,000

2.

Calculation of difference in amount of inventories:

(DifferenceinInventories)=(AmountofInventoriesof20X2AmountofInventoriesof20X1)=($18,000$20,800)=$2,800

3

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