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AccountingManagerial Accounting: The Cornerstone of Business Decision-Making7th Edition

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Chapter 14, Problem 48P
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Managerial Accounting: The Corners...

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

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Problem 1DQ
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Problem 5DQ
Problem 6DQ
Problem 7DQ
Problem 8DQ
Problem 9DQ
Problem 10DQ
Problem 11DQ
Problem 12DQ
Problem 13DQ
Problem 14DQ
Problem 1MCQ
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Problem 7MCQ
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Problem 21BEA
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Problem 27BEB
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Problem 30BEB
Problem 31BEB
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Problem 34E
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Problem 36E
Problem 37E
Problem 38E
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Problem 40E
Problem 41E
Problem 42E
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Problem 44P
Problem 45P
Problem 46P
Problem 47P
Problem 48P
Problem 49P
Problem 50P
Problem 51P
Problem 52P
Problem 53P
Problem 54P
Problem 55P
Problem 56P
Problem 57P
Problem 58C
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Booth Manufacturing has provided the following financial statements.

Chapter 14, Problem 48P, Booth Manufacturing has provided the following financial statements. Other information includes: (a)

 Other information includes: (a) equipment with a book value of $125,000 was sold for $175,000 (original cost was $225,000) and (b) dividends of $225,000 were declared and paid.

 Required:

  1. 1. Calculate the cash flows from operations using the indirect method.
  2. 2. Prepare a statement of cash flows.
  3. 3. CONCEPTUAL CONNECTION Search the Internet to find a statement of cash flows. Which method was used—the indirect method or the direct method? How does the net income reported compare to the operating cash flows? To the change in cash flows?

1.

To determine

Compute the cash flows from operations with the use of indirect method.

Explanation

Cash Flows from Operating Activities:

This category of a cash flow statement shows the operational and profit generating activities in a firm. The operating cash flows increase or decrease the current assets and current liabilities of a firm.

The cash flows from operations for B Company for 20X2 using indirect method is shown below:

ParticularsAmount ($)
Cash flows from operating activities: 
Net income450,000
Add/ Less: 
    Decrease in accounts receivable168,750
    Decrease in accounts payable2(62,500)
    Increase in inventories3(25,000)
    Depreciation expense4125,000
    Gain on sale of equipment5(50,000)
Net cash from operating activities506,250

Table (1)

Therefore, the net cash from operating activities is $506,250.

Working Note:

1.

Calculation of difference in accounts receivable:

(Difference inAccounts Receivable)=(Amount of Accounts Receivable of 20X2−Amount of Accounts Receivable of 20X1)=($281,250−$350,000)=−$68,750

2.

Calculation of difference in accounts payable:

(Difference inAccounts Payable)=(Amount of Accounts Payable of 20X2−Amount of Accounts Payable of 20X1)=($237,500−$300,000)=−$62,500

3

2.

To determine

Chart the statement of cash flows.

3.

To determine

Identify the method used in preparing the statement of cash flows of a company. Also, explain the manner in which the net income is compared with the operating cash flows and to the change in cash flows.

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Ch-14 P-1DQCh-14 P-2DQCh-14 P-3DQCh-14 P-4DQCh-14 P-5DQCh-14 P-6DQCh-14 P-7DQCh-14 P-8DQCh-14 P-9DQCh-14 P-10DQ
Ch-14 P-11DQCh-14 P-12DQCh-14 P-13DQCh-14 P-14DQCh-14 P-1MCQCh-14 P-2MCQCh-14 P-3MCQCh-14 P-4MCQCh-14 P-5MCQCh-14 P-6MCQCh-14 P-7MCQCh-14 P-8MCQCh-14 P-9MCQCh-14 P-10MCQCh-14 P-11MCQCh-14 P-12MCQCh-14 P-13MCQCh-14 P-14MCQCh-14 P-15MCQCh-14 P-16MCQCh-14 P-17BEACh-14 P-18BEACh-14 P-19BEACh-14 P-20BEACh-14 P-21BEACh-14 P-22BEACh-14 P-23BEACh-14 P-24BEACh-14 P-25BEBCh-14 P-26BEBCh-14 P-27BEBCh-14 P-28BEBCh-14 P-29BEBCh-14 P-30BEBCh-14 P-31BEBCh-14 P-32BEBCh-14 P-33ECh-14 P-34ECh-14 P-35ECh-14 P-36ECh-14 P-37ECh-14 P-38ECh-14 P-39ECh-14 P-40ECh-14 P-41ECh-14 P-42ECh-14 P-43ECh-14 P-44PCh-14 P-45PCh-14 P-46PCh-14 P-47PCh-14 P-48PCh-14 P-49PCh-14 P-50PCh-14 P-51PCh-14 P-52PCh-14 P-53PCh-14 P-54PCh-14 P-55PCh-14 P-56PCh-14 P-57PCh-14 P-58C

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