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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Reporting stockholders’ equity items on statement of cash flows

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.

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To determine

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.

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

Explanation

Statement of cash flows
Particulars Amount ($)
Cash flows from (used for) financing activities :  
Cash from sale of common stock $1,920,000
Cash used for dividends ($463,200)

Table (1)

Explanation:

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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