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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 16, Problem 12E
Textbook Problem
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On the basis of the following stockholders’ equity accounts, indicate the items, exclusive of net income, to be reported on the statement of cash flows. There were no unpaid dividends at either the beginning or the end of the year.

Chapter 16, Problem 12E, On the basis of the following stockholders equity accounts, indicate the items, exclusive of net , example  1

Chapter 16, Problem 12E, On the basis of the following stockholders equity accounts, indicate the items, exclusive of net , example  2

Chapter 16, Problem 12E, On the basis of the following stockholders equity accounts, indicate the items, exclusive of net , example  3

To determine

Indicate items to be reported on the statement of cash flows.

Explanation of Solution

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Working note: Calculate the amount of cash from sale of common stock:

Cash from sale of common stock =( 30,000 shares issued for cash + 30,000 shares issued for cash )=($1,200,000+$720,000)=$1,920,000

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
Depreciation expense and amortization expense
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

Table (2)

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

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Chapter 16 Solutions

Financial Accounting
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