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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

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

Statement of Cash Flows The following items involve the cash flow activities of Rocky Horror Picture Co.:

  1. a. Net income, $41,000
  2. b. Payment of dividends, $16,000
  3. c. Ten year, $28,000 bonds payable were issued at face value
  4. d. Depreciation expense, $11,000
  5. e. Building acquired at a con of $40,000
  6. f. Accounts receivable decreased by $2,000
  7. g. Accounts payable decreased by $4,000
  8. h. Equipment acquired at a cost of $8,000
  9. i. Inventories increased by $7,000
  10. j. Beginning cash balance, $13,000

Required:

Prepare Rocky Horror Picture’s statement of cash flows using the indirect method.

To determine

Prepare the statement of cash flows for Company RH using the indirect method.

Explanation

Statement of cash flows: Statement of cash flows 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 this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Prepare the statement of cash flows for Company RH using the indirect method.

...
Company RH
Statement of Cash Flows - Indirect Method
For the year ended December 31, 2018
ParticularsAmount ($)Amount ($)
Cash flows from operating activities:  
Net Income 41,000
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation expense11,000 

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