Question
Why in some exercises, where we have to prepare a cash flow statement under the indirect method, depreciation is added in the cash flow from
Why in some exercises, where we have to prepare a cash flow statement under the indirect method, depreciation is added in the cash flow from operation only, while in other exercises depreciation is also added in the cash flow from investing (to compute the change in long lived assets)?
I'll provide an example:
In the Monahan case we just sum the depreciation expense of $2,550 in the CFFO and the accumulated depreciation of $600 is used in the change in long lived assets in the CFFI (shouldn't we also account for the $2,550?).
In this other case instead, the depreciation expense of $16M is accounted in both the CFO and the CFI. WHY?
5-2 Monahan Manufacturing: Preparing and Interpreting a Statement of Cash Flows Balance sheets for Monahan Manufacturing, Inc., appear in Exhibit 5.8. Additional information includes the following (all amounts in thousands): - Net income for 2012 was $2,840. - Dividends declared and paid were $300. - Depreciation expense on buildings and machinery was $2,550 for the year. - The firm sold for $125 machinery originally costing $750 and accumulated depreciation of $600. - The firm retired bonds during the year at their book value. Required Prepare a statement of cash flows for Monahan Manufacturing for 2012 using the indirect method to compute CFFO. Comment on the pattern of cash flows from operating, investing, and financing activities. Exhibit 5.8 Monahan Manufacturing, Inc.: Balance Sheets for noromhor 21 2011 and 2012 (in thniesende nf dnllare) Example Magistretti CaseStep by Step Solution
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