Logout Open In App
Open In App
Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 14: 17E (page 732)

Classifying transactions on the statement of cash flows—indirect method Consider the following transactions:

Identify the category of the statement of cash flows, indirect method, in which each transaction would be reported.

Short Answer

Expert verified
  1. Financing
  2. Investing
  3. Operating
  4. Investing
  5. Operating
  6. Financing
  7. Non-cash
  8. Investing
  9. Financing
  10. Non-cash
  11. Investing

Step by step solution

01

Classification of operating activities

c. Sales revenue of $88,000 is an operating activity.

e. Depreciation expense of $6,800 is an operating activity.

02

Classification of investing activities

b. Treasury stock sold for $16,500 is an investing activity.

d. Land purchased for cash $103,000 is an investing activity.

h. Equipment sold for $9,600 is an investing activity.

k. Loss of $1,800 on disposal of equipment is an investing activity.

03

Classification of financing activities

a. Issuance of common stock for cash of $72,000 is a financing activity.

f. Cash paid for dividends is a financing activity.

i. Bonds payable of $51,000 is a financing activity

04

Classification of non-cash activities

g. Land in exchange of notes payable is a non-cash activity.

j. Building in exchange of notes payable is a non-cash activity

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Moss Exports is having a bad year. Net income is only \(60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Moss’s accounts receivable are ballooning. The company desperately needs a loan. The Moss Exports Board of Directors is considering ways to put the best face on the company’s financial statements. Moss’s bank closely examines cash flow from operating activities. Daniel Peavey, Moss’s controller, suggests reclassifying the receivables from the slow-paying clients as long-term. He explains to the board that removing the \)80,000 increase in accounts receivable from current assets will increase net cash provided by operations. This approach may help Moss get the loan.

Requirements

  1. Using only the amounts given, compute net cash provided by operations, both without and with the reclassification of the receivables. Which reporting makes Moss look better?
  2. Under what condition would the reclassification of the receivables be ethical? Unethical?

Question: Preparing operating activities cash flow—direct method

The accounting records of Four Seasons Parts reveal the following:

Payment of salaries and wages \( 34,000

Net income \) 21,000

Depreciation expense 10,000

Payment of income tax 16,000

Payment of interest 17,000

Collection of dividend revenue 5,000

Payment of dividends 5,000

Payment to suppliers 51,000

Collections from customers 116,000

Compute cash flows from operating activities using the direct method for the year ended December 31, 2018.

Preparing the direct method statement of cash flows Red Toy Company reported the following comparative balance sheet:

Requirements

1. Compute the collections from customers during 2018 for Red Toy Company. Sales Revenue totaled \(134,000.

2. Compute the payments for inventory during 2018. Cost of Goods Sold was \)79,000.

Preparing the statement of cash flows-indirect statement This problem continues the Canyon Canoe Company situation from Chapter 13. Canyon Canoe Company's comparative balance sheet is shown below. 2019 amounts are assumed, but include several transactions from prior chapters.

Additional data fellow:

  1. The income statement for 2019 included the following items: Net income, \(417,000. Depreciation expense for the year, \)34,330. Amortization on the bonds payable, \(254.
  2. There were no disposals of property, plant and equipment during this year. All acquistions of PP&E were for cash except the land, which was acquired by issuing preferred stock.
  3. The company issued bonds payable with a face value of \)210,000, receiving cash of \(208,476.
  4. The company distributed 4,000 shares of common stock in a stock dividend when the market value was \)4.50 per share. All other dividends were paid in cash.
  5. The common stock, except for the stock dividend, was issued for cash.
  6. The cash receipt from the note payable in 2019 is considered a financing activity because it does not relate to operations. Requirements Prepare the statement of cash flows for the year ended December 31, 2019, using the indirect method.

Preparing the statement of cash flows—indirect method

Accountants for Morganson, Inc. have assembled the following data for the year ended December 31, 2018:

2018 2017 Current Assets: Cash \( 99,400 \) 25,000 Accounts Receivable 64,100 69,700 Merchandise Inventory 83,000 75,000 Current Liabilities: Accounts Payable 57,600 55,200 Income Tax Payable 14,800 16,800

Transaction Data for 2018:

Issuance of common stock for cash \( 38,000

Payment of notes payable \) 46,100

Depreciation expense 24,000

Payment of cash dividends 50,000

Purchase of equipment with cash 74,000

Issuance of notes payable to borrow cash 62,000

Acquisition of land by issuing long-term notes payable 119,000

Gain on sale of building 4,500 Book value of building sold 54,000

Net income 68,500

Prepare Morganton'sstatement of cash flows using the indirect method. Include an accompanying schedule of non-cash investing and financing activities.
See all solutions

Recommended explanations on Business Studies Textbooks

Nature of Business

Read Explanation

Operational Management

Read Explanation

Strategy

Read Explanation

Influences On Business

Read Explanation

Business Case Studies

Read Explanation

Corporate Finance

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free