Chapter 23: Q21Q (page 1372)
Question: Why is it desirable to use a worksheet when preparing a statement of cash flows? Is a worksheet required to prepare a statement of cash flows?
Answer
Yes, the worksheet is desirablefor preparing the statement of cash flow because it provides relevant information in a classified manner.
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The following data are taken from the records of Alee Company
December 31, December 31,
2017 2016
Cash \( 15,000 \) 8,000
Current assets other than cash 85,000 60,000
Long-term debt investments 10,000 53,000
Plant assets 335,000 215,000
\(445,000 \)336,000
December 31, December 31,
2017 2016
Accumulated depreciation \( 20,000 \) 40,000
Current liabilities 40,000 22,000
Bonds payable 75,000 –0–
Common stock 254,000 254,000
Retained earnings 56,000 20,000
\(445,000 \)336,000
Additional information:
1. Held-to-maturity securities carried at a cost of \(43,000 on December 31, 2016, were sold in 2017 for \)34,000. The loss (not unusual) was incorrectly charged directly to Retained Earnings.
2. Plant assets that cost \(50,000 and were 80% depreciated were sold during 2017 for \)8,000. The loss was incorrectly charged directly to Retained Earnings.
3. Net income as reported on the income statement for the year was \(57,000.
4. Dividends paid amounted to \)10,000.
5. Depreciation charged for the year was $20,000.
Instructions
Prepare a statement of cash flows for the year 2017 using the indirect method
Identify the following items as (1) operating, (2) investing, or (3) financing activities: purchase of land, payment of dividends, cash sales, and purchase of treasury stock.
In 2017, Elbert Corporation had net cash provided by operating activities of \(531,000, net cash used by investing activities of \)963,000, and net cash provided by financing activities of \(585,000. At January 1, 2017, the cash balance was \)333,000. Compute December 31, 2017, cash
In 2017, Leppard Inc. issued 1,000 shares of \(10 par value common stock for land worth \)40,000.
(a) Prepare Leppard’s journal entry to record the transaction.
(b) Indicate the effect the transaction has on cash.
(c) Indicate how the transaction is reported on the statement of cash flows.
Question: Explain how the amount of cash payments to suppliers is computed under the direct method.
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