Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281



Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem

Thompson Company sold a piece of equipment that had an original cost of $22,000 and a carrying value of $10,000 for $13,000 in cash. How would this information be reported on a statement of cash flows prepared using the indirect method?

To determine

Report the given information in the statement of cash flow using indirect method.


Statement of cash flows: Statement of cash flow reports all the cash transactions which are responsible for inflow and outflow of cash , and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.

Indirect method: Under indirect method, net income is reported first, then non-cash expenses, losses from fixed assets, and changes in opening balances and ending balances of current assets are adjusted to reconcile the net income balance.

Operating activities: Operating activities are the functions of a business directly related to providing its goods or services to the market. It includes cash inflows and outflows from business operations such as manufacturing, distributing, marketing, and selling a product or service.

Investing activities: Investing activities is one of the three main sections of the statement of cash flows...

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