increase - increase can be explained by two factors(1 Net...

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Increase in Bonds Payable. The Bonds Payable account increased $110,000. As indicated in the additional information, the company acquired land by directly exchanging bonds for land. It reports this noncash transaction in a separate schedule at the bottom of the statement. Increase in Common Stock. The balance sheet reports an increase in Common Stock of $20,000. The additional information section notes that this increase resulted from the issuance of new shares of stock. This is a cash inflow reported in the financing section. Helpful Hint When companies issue stocks or bonds for cash, the actual proceeds will appear in the statement of cash flows as a financing inflow (rather than the par value of the stocks or face value of bonds). Increase in Retained Earnings. Retained earnings increased $116,000 during the year. This
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Unformatted text preview: increase can be explained by two factors: (1) Net income of $145,000 increased retained earnings. (2) Dividends of $29,000 decreased retained earnings. The company adjusts net income to net cash provided by operating activities in the operating activities section. Payment of the dividends (not the declaration) is a cash outflow that the company reports as a financing activity . Statement of Cash Flows—2010 Using the previous information, we can now prepare a statement of cash flows for 2010 for Computer Services Company as shown in Illustration 12-14 . Helpful Hint Note that in the investing and financing activities sections, positive numbers indicate cash inflows (receipts), and negative numbers indicate cash outflows (payments). 12-14 Statement of cash flows, 2010—indirect method...
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