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Cash Flows from (Used for) Operating Activities The income statement disclosed the following items for the year: Depreciation expense Gain on disposal of equipment $57,000
Cash Flows from (Used for) Operating Activities The income statement disclosed the following items for the year: Depreciation expense Gain on disposal of equipment $57,000 33,240 497,300 Net income The changes in the current asset and liability accounts for the year are as follows: Increase (Decrease) Accounts receivable $8,880 Inventory (5,050) Prepaid insurance (1,890) Accounts payable (6,020) Income taxes payable 1,890 Dividends payable 1,330 a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from (used for) operating activities: a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from (used for) operating activities: Net income Adjustments to reconcile net income to net cash flows from (used for) operating activities: Depreciation expense Gain on disposal of equipment Changes in current operating assets and liabilities: Increase in accounts receivable Decrease in inventory Decrease in prepaid insurance Decrease in accounts payable Increase in income taxes payable Net cash flows from operating activities b. Why is net cash flows from operating activities different than net income? Cash flows from operating activities is based on cash basis using accrual basis of accounting. 497,300 57,000 13333 5,050 1,890 -6,020 1,890 of accounting, whereas net income is computed Reporting Land Transactions on Statement of Cash Flows On the basis of the details of the following fixed asset account, indicate the items to be reported on the statement of cash flows: ACCOUNT Land ACCOUNT NO. Balance Date Item Debit Credit Debit Credit Jan. 1 Balance 1,110,000 Mar. 12 Purchased for cash 344,000 1,454,000 Oct. 4 Sold for $189,000 162,000 1,292,000 Item Mar. 12: Purchase of fixed asset Section of Statement of Cash Flows Added or Deducted Amount Investing activities section Oct. 4: Sale of fixed asset Investing activities section Deducted Added x Gain on sale of fixed asset (assume the indirect method) Operating activities section Deducted x Feedback Check My Work Keep in mind that you are trying to determine what affect these transactions have on cash. What financial statement would the gain on the sale of fixed asset
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