Statement of cash flows:
Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Cash flows from operating activities:
These refer to the cash received or cash paid in day-to-day operating activities of a company.
Indirect method:
Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.
- Deduct increase in current assets.
- Deduct decrease in current liabilities.
- Add decrease in current assets.
- Add the increase in current liability.
- Add
depreciation expense and amortization expense. - Add loss on sale of plant assets.
- Less gain on sale of plant assets.
Cash flow from investing activities:
This section of cash flows statement provides information concerning about the purchase and sale of capital assets by the company.
- Deduct the amount of cash used to purchase any fixed assets.
- Add the amount of cash received from sale of any fixed asset.
Cash flow from financing activities:
This section of cash flows statement provides information about the
- Add the amount of cash received from any sources of finance.
- Deduct the amount of cash used for payment for dividend and interest from financing activities.
- Deduct the amount of cash used for payment of
treasury stock from financing activities.
To prepare: The statement of cash flow of Industries M under the indirect method.
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Intermediate Accounting
- (47) The FASB and IASB prefer the direct method of reporting operating cash flows on the statement of cash flows. True Falsearrow_forward(Appendix 21.1) Operating Cash Flows Refer to the information for Lamberson Company in P21-6. Required: 1. Using the direct method, prepare the operating activities section of the 2019 statement of cash flows for Lamberson. 2. (Optional). If you completed P21-6 earlier, prepare the remaining portion of the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)arrow_forwardProblem 21-4 (Algo) Statement of cash flows; direct method [LO21-3, 21-8] The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Dux Company. Additional information from Dux's accounting records is provided also. DUX COMPANYComparative Balance SheetsDecember 31, 2021 and 2020($ in thousands) 2021 2020 Assets Cash $ 49 $ 24 Accounts receivable 46 53 Less: Allowance for uncollectible accounts (3 ) (2 ) Dividends receivable 3 2 Inventory 65 60 Long-term investment 21 18 Land 85 60 Buildings and equipment 273 290 Less: Accumulated depreciation (70 ) (90 ) $ 469 $ 415 Liabilities Accounts payable $ 35 $ 43 Salaries payable 3 7 Interest payable 7 2 Income tax payable 8 9 Notes payable 25 0 Bonds payable…arrow_forward
- 9) Exercise 21-30 (Static) FASB codification research [LO21-1, 21-4, 21-7] Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific eight-digit Codification citation (XXX-XX-XX-X) for accounting for each of the following items: Disclosure of interest and income tax paid if the indirect method is used. Primary objectives of a statement of cash flows. Disclosure of noncash investing and financing activities.arrow_forwardHow do proceeds from the sale of PPE impact Declan's Designs' 2022 Statement of Cash Flows? Question 24 options: The proceeds from the sale of PPE are added in Cash Flows from Financing The proceeds from the sale of PPE are added in Cash Flows from Operations The proceeds from the sale of PPE are subtracted in Cash Flows from Financing The proceeds from the sale of PPE are not included on the Statement of Cash Flows The proceeds from the sale of PPE are subtracted in Cash Flows from Investing The proceeds from the sale of PPE are added in Cash Flows from Investing The proceeds from the sale of PPE are subtracted in Cash Flows from Operationsarrow_forwardExercise 21-27 (Algo) Statement of cash flows; direct method [LO21-3, 21-5, 21-6, 21-8] Comparative balance sheets for 2024 and 2023, a statement of income for 2024, and additional information from the accounting records of Red, Incorporated, are provided below: RED, INCORPORATED Comparative Balance Sheets December 31, 2024 and 2023 ($ in millions) 2024 2023 Assets Cash $ 26 $ 114 Accounts receivable 203 134 Prepaid insurance 11 6 Inventory 289 177 Buildings and equipment 384 352 Less: Accumulated depreciation (121) (242) $ 792 $ 541 Liabilities Accounts payable $ 90 $ 104 Accrued liabilities 10 15 Notes payable 52 0 Bonds payable 161 0 Shareholders’ Equity Common stock 402 402 Retained earnings 77 20 $ 792 $ 541 RED, INCORPORATED Statement of Income For Year Ended December 31, 2024 ($ in millions) Revenues Sales revenue $ 2,010 Expenses Cost of goods sold $ 1,439 Depreciation expense 41…arrow_forward
- Q 23.28: When preparing its statement of cash flows, a firm discovers that its accounts receivable balance has decreased over the course of the period. Given this information, which of the following statements is accurate? A : If the firm is using the direct method, this discovery should lead to an upward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to an upward adjustment when calculating cash flow from operating activities. B : If the firm is using the direct method, this discovery should lead to an upward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to a downward adjustment when calculating cash flow from operating activities. C : If the firm is using the direct method, this discovery should lead to a downward adjustment when calculating cash receipts for customers. If it is using the indirect method, this…arrow_forwardHow do Other Payables impact Avett Inc.'s 2020 Statement of Cash Flows? Question 17 options: The periodic change in Other Payables is subtracted in Cash Flows from Investing The periodic change in Other Payables is added in Cash Flows from Operations The periodic change in Other Payables is subtracted in Cash Flows from Financing The periodic change in Other Payables is added in Cash Flows from Financing The periodic change in Other Payables is added in Cash Flows from Investing The periodic change in Other Payables is not included on the Statement of Cash Flows The periodic change in Other Payables is subtracted in Cash Flows from Operationsarrow_forwardHow do proceeds from the sale of PPE impact Declan's Designs' 2022 Statement of Cash Flows? Question 24 options: The proceeds from the sale of PPE are added in Cash Flows from Financing The proceeds from the sale of PPE are subtracted in Cash Flows from Financing The proceeds from the sale of PPE are added in Cash Flows from Investing The proceeds from the sale of PPE are subtracted in Cash Flows from Operations The proceeds from the sale of PPE are subtracted in Cash Flows from Investing The proceeds from the sale of PPE are not included on the Statement of Cash Flows The proceeds from the sale of PPE are added in Cash Flows from Operationsarrow_forward
- Appendix 2PR 13-4B Statement of cash flows—direct method The comparative balance sheet of Martinez Inc. for December 31, 20Y4 and 20Y3, is as follows:Dec. 31, 20Y4Dec. 31, 20Y3AssetsCash .....................................................$ 661,920$ 683,100Accounts receivable (net) .................................. 992,640 914,400Inventories ...............................................1,394,4001,363,800Investments ..............................................0432,000Land ..................................................... 960,0000Equipment................................................1,224,000 984,000Accumulated depreciation—equipment ....................(481,500)(368,400)Total assets ...............................................$4,751,460$4,008,900Liabilities and Stockholders’ EquityAccounts payable (merchandise creditors) ..................$1,080,000$ 966,600Accrued expenses payable (operating expenses) ............67,80079,200Dividends…arrow_forward(50) Investing and financing activities for the statement of cash flows may differ when using the direct method instead of the indirect method True or Falsearrow_forward19 What does the current ratio measure? Multiple Choice The relative proportion of current versus noncurrent assets Whether current assets are sufficient to pay current liabilities The speed which current assets can be converted to cash Whether cash is sufficient to pay current liabilitiesarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning