Warren SMChap14 - CHAPTER 14 STATEMENT OF CASH FLOWS EYE...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
723 CHAPTER 14 STATEMENT OF CASH FLOWS EYE OPENERS 1. It is costly to accumulate the data needed. 2. It focuses on the differences between net income and cash flows from operating activi- ties, and the data needed are generally more readily available and less costly to ob- tain than is the case for the direct method. 3. In a separate schedule of noncash investing and financing activities accompanying the statement of cash flows. 4. The $40,000 increase must be added to in- come from operations because the amount of cash paid to merchandise creditors was $40,000 less than the amount of purchases included in the cost of goods sold. 5. The $20,000 decrease in salaries payable should be deducted from income to deter- mine the amount of cash flows from operat- ing activities. The effect of the decrease in the amount of salaries owed was to pay $20,000 more cash during the year than had been recorded as an expense. 6. a. $12,000 gain b. Cash inflow of $72,000 c. The gain of $12,000 would be deducted from net income in determining net cash flow from operating activities; $72,000 would be reported as cash flow from in- vesting activities. 7. Cash flow from financing activities— issuance of bonds, $6,240,000 8. a. Cash flow from investing activities— disposal of fixed assets, $24,000 The $24,000 gain on asset disposal should be deducted from net income in determining cash flow from operating activities under the indirect method. b. No effect 9. The same. The amount reported as the net cash flow from operating activities is not af- fected by the use of the direct or indirect method. 10. Cash received from customers, cash pay- ments for merchandise, cash payments for operating expenses, cash payments for interest, cash payments for income taxes. 11. Reported in a separate schedule, as follows: Schedule of noncash financing activities: Issuance of stock for acquisitions . .................. $128 million
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
724 PRACTICE EXERCISES PE 14–1A a. Financing d. Financing b. Investing e. Operating c. Operating f. Operating PE 14–1B a. Operating d. Operating b. Financing e. Investing c. Investing f. Operating PE 14–2A Net income. .......................................................................................... $140,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation. ................................................................................. 7,000 Amortization of patents . .............................................................. 2,600 Gain from sale of land. ................................................................. (15,000 ) Net cash flow from operating activities . ........................................... $134,600 PE 14–2B Net income. .......................................................................................... $86,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation. ................................................................................. 6,000 Amortization of patents . .............................................................. 2,200 Loss from sale of investments. ................................................... 3,200 Net cash flow from operating activities . ........................................... $97,400
Background image of page 2
725 PE 14–3A Net income. .......................................................................................... $320,000 Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Increase in accounts receivable. .......................................... (6,000) Increase in inventory. ............................................................ (8,500) Increase in accounts payable. .............................................. 11,500 Net cash flow from operating activities . ........................................... $317,000 Note: The change in dividends payable impacts the cash paid for dividends, which is disclosed under financing activities.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/30/2011 for the course ACCT 2331 taught by Professor Staff during the Spring '08 term at University of Houston.

Page1 / 44

Warren SMChap14 - CHAPTER 14 STATEMENT OF CASH FLOWS EYE...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online