Statement of
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.
Cash flows from operating activities: These are the cash produced by the normal business operations.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Indirect method) |
Add: Decrease in current assets |
Increase in current liability |
|
Loss on sale of plant assets |
Deduct: Increase in current assets |
Decrease in current liabilities |
Gain on sale of plant assets |
Net cash provided from or used by operating activities |
Table (1)
To Prepare: The cash flows from operating activities sections of the statement of cash flows using indirect method.
Trending nowThis is a popular solution!
Chapter 14 Solutions
Financial & Managerial Accounting
- COMPUTE CASH PROVIDED BY OPERATING ACTIVITIES Powell Companys condensed income statement for the year ended December 31, 20-2, was as follows: Additional information obtained from Powells comparative balance sheet and auxiliary records as of December 31, 20-2 and 20-1, was as follows: Depreciation expense for 20-2, included in operating expenses on the income statement, was 29,000. REQUIRED Prepare a partial statement of cash flows reporting cash provided by operating activities for the year ended December 31, 20-2.arrow_forwardCOMPUTE CASH PROVIDED BY OPERATING ACTIVITIES Horn Companys condensed income statement for the year ended December 31, 20-2, was as follows: Additional information obtained from Horns comparative balance sheet and auxiliary records as of December 31, 20-2 and 20-1, was as follows: Depreciation expense for 20-2, included in operating expenses on the income statement, was 32,000. REQUIRED Prepare a partial statement of cash flows reporting cash provided by operating activities for the year ended December 31, 20-2.arrow_forwardCOMPUTE CASH PROVIDED BY OPERATING ACTIVITIES Powell Companys condensed income statement for the year ended December 31, 20-2, was as follows: Additional information obtained from Horns comparative balance sheet and auxiliary records as of December 31, 20-2 and 20-1, was as follows: Depreciation expense for 20-2, included in operating expenses on the income statement, was 32,000. REQUIRED Prepare a partial statement of cash flows reporting cash provided by operating activities for the year ended December 31, 20-2. SCHEDULE FOR CALCULATION OF CASH GENERATED FROM OPERATING ACTIVITIES Using the information provided in Problem 23-11B for Powell Company, prepare the following: 1. A schedule for the calculation of cash generated from operating activities for Powell Company for the year ended December 31, 20-2. 2. A partial statement of cash flows for Powell Company reporting cash from operating activities under the direct method for the year ended December 31, 20-2.arrow_forward
- COMPUTE CASH PROVIDED BY OPERATING ACTIVITIES Horn Companys condensed income statement for the year ended December 31, 20-2, was as follows: Additional information obtained from Horns comparative balance sheet and auxiliary records as of December 31, 20-2 and 20-1, was as follows: Depreciation expense for 20-2, included in operating expenses on the income statement, was 32,000. REQUIRED Prepare a partial statement of cash flows reporting cash provided by operating activities for the year ended December 31, 20-2. SCHEDULE FOR CALCULATION OF CASH GENERATED FROM OPERATING ACTIVITIES Using the information provided in Problem 23-9A for Horn Company, prepare the following: 1. A schedule for the calculation of cash generated from operating activities for Horn Company for the year ended December 31, 20-2. 2. A partial statement of cash flows for Horn Company reporting cash from operating activities under the direct method for the year ended December 31, 20-2.arrow_forwardPartial Statement of Cash Flows Service Company had net income during the current year of $65,800. The following information was obtained from Services balance sheet: Accounts receivable $26,540 increase Inventory 32,180 increase Accounts payable 9,300 decrease Interest payable 2,120 increase Accumulated depreciation (Building) 14,590 increase Accumulated depreciation (Equipment) 32,350 increase Additional Information: 1. Equipment with accumulated depreciation of $18,000 was sold during the year. 2. Cash dividends of $29,625 were paid during the year. Required: 1. Prepare the net cash flows from operating activities using the indirect method. 2. CONCEPTUAL CONNECTION How would the cash proceeds from the sale of equipment he reported on the statement of cash flows? 3. CONCEPTUAL CONNECTION How would the cash dividends be reported on the statement of cash flows? 4. CONCEPTUAL CONNECTION What could the difference between net income and cash flow from operating activities signal to financial statement users?arrow_forwardStatement of Cash Flows The following are Mueller Companys cash flow activities: a. Net income, 68,000 b. Increase in accounts receivable, 4,400 c. Receipt from sale of common stock, 12,300 d. Depreciation expense, 11,300 e. Dividends paid, 24,500 f. Payment for purchase of building, 65,000 g. Bond discount amortization, 2,700 h. Receipt from sale of long-term investments at cost, 10,600 i. Payment for purchase of equipment, 8,000 j. Receipt from sale of preferred stock, 20,000 k. Increase in income taxes payable, 3,500 l. Payment for purchase of land, 9,700 m. Decrease in accounts payable, 2,900 n. Increase in inventories, 10,300 o. Beginning cash balance, 18,000 Required: Prepare Mueller Company's statement of cash flows.arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning