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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
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Statement of Cash Flows The following are several items involving Tejera Company’s cash flow activities:

  1. a. Net income, $60,400
  2. b. Receipt from issuance of common stock, $32,000
  3. c. Payment for purchase of equipment, $41,500
  4. d. Payment for purchase of land, $19,600
  5. e. Depreciation expense, $20,500
  6. f. Patent amortization expense, $ 1,200
  7. g. Payment of dividends, $21,000
  8. h. Decrease in salaries payable, $2,600
  9. i. Increase in accounts receivable, $10,300
  10. j. Beginning cash balance, $30,700

Required:

Prepare Tejera’s statement of cash flows using the direct method.

To determine

Prepare the statements of cash flows for Company T using indirect method.

Explanation

Statement of cash flows: This statement 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, and 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.

Prepare the statements of cash flows for Company T using indirect method:

Company T
Statement of Cash Flows (Indirect Method)
For the year ended December 31, 2018
ParticularsAmount ($)Amount ($)
Cash flows from operating activities:  
Net income  60,400
Adjustments for non-cash items:  
Depreciation expense20,500 
Patent amortization expense1,200 
Adjustments for working capital: ...

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