2008-11-22_051006_P23-7

2008-11-22_051006_P23-7 - (a) Both the direct method and...

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Unformatted text preview: (a) Both the direct method and the indirect method for reporting cash flows from operating activities are acceptable in preparing a statement of cash flows according to SFAS No. 95; however, the FASB encourages the use of the direct method. Under the direct method, the statement of cash flows reports the major classes of cash receipts and cash disburse-ments, and discloses more information; this may be the statements principal advantage. Under the indirect method, net income on the accrual basis is adjusted to the cash basis by adding or deducting noncash items included in net income, thereby providing a useful link between the statement of cash flows and the income statement and balance sheet. (b) The Statement of Cash Flows for George Winston Company, for the year ended May 31, 2008, using the direct method, is presented below. George Winston Company STATEMENT OF CASH FLOWS For the Year Ended May 31, 2008 Cash flows from operating activities Cash received from customers $1,233,250 Cash paid To suppliers $674,000 To employees 276,850 For other expenses 10,150...
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2008-11-22_051006_P23-7 - (a) Both the direct method and...

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