Chapter 14: Q14-3RQ (page 768)
Question: Describe the three basic types of cash flow activities.
Answer
The three basic types of cash flow activities are operating activity, investing activity, and financing activity.
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
Question: Explain why depreciation expense, depletion expense, and amortization expense are added to net income in the operating activities section of the statement of cash flows when using the indirect method.
Question: Computing cash flows from operating activities—indirect method
Winding Road Cellular accountants have assembled the following data for the year ended April 30, 2018:
Cash receipt from sale of land \( 27,000
Net income \) 55,000
Depreciation expense 2,000
Cash purchase of equipment 44,000
Cash payment of dividends 5,800
Decrease in current liabilities 20,000
Cash receipt from issuance of common stock 17,000
Increase in current assets other than cash 27,000
Prepare the operating activities section using the indirect method for Winding Road Cellular’s statement of cash flows for the year ended April 30, 2018.
The 2018 income statement and comparative balance sheet of Sweet Valley, Inc. follow:
Additionally, Sweet Valley purchased land of \(20,900 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for \)0. The cost and the accumulated depreciation of the disposed asset was $13,240. Plant asset was acquired for cash.
Requirements
1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method.
2. How will what you learned in this problem help you evaluate an investment?
Question: What accounts on the balance sheet must be evaluated when completing the investing activities section of the statement of cash flows?
Jennifer’s Wedding Shops earned net income of \(27,000, which included depreciation of \)16,000. Jennifer’s acquired a \(119,000 building by borrowing \)119,000 on a long-term note payable.
Requirements
they would be reported in the statement of cash flows.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
