The spreadsheet on the textbook€™s Web site contains a dynamic version of the spreadsheet reproduced below:

In the dynamic version of this spreadsheet available on the Web site, you can change any of the numbers in the yellow shaded section and see the effect of the change in the statement of cash flows section for cash flows from operations.
a. Download the spreadsheet and change the first line of the income statement from $25 to $27, increasing income by $2. What is the effect on S1?
b. Go back to the original configuration. Change only the second line of the income statement from $1 to $5, increasing income by $4. What are the effects on lines (1) €“ (5) and
S1 of the cash flows from operations sections?
c. Go back to the original configuration. Now, make two changes: change the third line of the income statement from ($15) to ($17) and at the same time, change the fourth line from ($4) to ($2), leaving income unchanged. What are the effects on lines (1) €“ (5) and
S1 of the cash flows from operationssections?

Transcribed Image Text:

Lines in Schematic Statement of Cash Flows 3 Income Statement 4 Revenues matched with cash inflows this period ......25 5 Revenues and gains with no cash inflows this perñiod . 6 Expenses matched with expenditures this period. . .(15) 7 Expenses and losses with no cash outflow this period. 8 Net Income 9 Direct Method for Deriving Cash Flow from Operations 10 | Revenues matched with cash inflows this period . . . . . . . . . . . 11 Expenses and losses with no cash outflow this period 12Cash Flow from Operations $ 10 13 Indirect Method for Deriving Cash Flow from 0perations Line (1) Line (2) NARR 7 Line (3) 25 (15) Line (1) Line (2) S1 Line (3) Line (4) Line (5) S1 15 Addback Expenses and Losses not Using Cash this Period. 16 Subtract Revenues not Producing Receipts this Period.. 4