Chapter 14: Q14-13RQ (page 769)
Question: What should the net change in cash section of the statement of cash flows always reconcile with?
Answer
The net change in cash section of the statement of cash flows always reconcile with the closing balance of the cash in the balance sheet.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Computing operating activities cash flow—indirect method
The accounting records of CD Sales, Inc. include the following accounts: Account Beginning Balance Ending Balance Cash \( 7,500 \) 6,500 Accounts Receivable 21,000 17,500 Merchandise Inventory 20,000 30,000 Accounts Payable 15,000 19,000 Accumulated Depreciation— Equipment
2,000 Depr. Exp.
56,000 Jul. 1
58,000 Jul. 31
Retained Earnings
Dividends 15,000
63,000 Jul. 1
50,000 Net Inc.
98,000 Jul. 31
Compute CD’s net cash provided by (used for) operating activities during July 2018. Use the indirect method.
Computing operating activities cash flow—indirect method
The records of Vintage Color Engraving reveal the following:
Net income \( 36,000
Depreciation expense \) 5,000
Sales revenue 53,000
Decrease in current liabilities 19,000
Loss on sale of land 4,000
Increase in current assets other than cash 10,000
Acquisition of land 35,000
Compute cash flows from operating activities by the indirect method for year ended December 31, 2018.
Question: Computing investing and financing cash flows Preston Media Corporation had the following income statement and balance sheet for 2018:
PRESTON MEDIA CORPORATION
Income Statement
Year Ended December 31, 2018
Sales Revenue \(80,000
Depreciation Expense––Plant Assets \)11,000
Other Expenses \(50,000
Net Income \)19,000
Requirements
1. Compute the acquisition of plant assets for Preston Media Corporation during 2018. The business sold no plant assets during the year. Assume the company paid cash for the acquisition of plant assets.
2. Compute the payment of a long-term note payable. During the year, the business issued a $4,400 note payable.
Question: How does the direct method differ from the indirect method when preparing the operating activities section of the statement of cash flows?
Preparing the direct method statement of cash flows Use the data in Short Exercise S14A-12 and your results. Prepare the business’s complete statement of cash flows for the year ended June 30, 2018, using the direct method for operating activities.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
