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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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Net Cash Flow from Operating Activities The following are accounting items taken from Tyrone Shoelaces Required:

  1. a. Net income, $22,900
  2. b. Payment for purchase of land, $4,000
  3. c. Payment for retirement of bonds, $6,000
  4. d. Depreciation expense, $7,800
  5. e. Receipt from issuance of common stock, $7,000
  6. f. Patent amortization expense, $2,700
  7. g. Increase in accounts receivable, $3,400
  8. h. Payment of dividends, $5,000
  9. i. Decrease in accounts payable, $2,600

Required:

Prepare the operating activities section of Tyrone’s statement of cash flows using the indirect method.

To determine

Prepare the operating activities section of Company T’s statement of cash flows using the 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.

Operating activities: Operating activities include cash inflows and outflows from the day to day business operations.

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

Company T
Statement of Cash Flows (Indirect Method)
For the year end...

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