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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?

Short Answer

Expert verified

Answer

Yes, the worksheet is desirablefor preparing the statement of cash flow because it provides relevant information in a classified manner.

Step by step solution

01

Definition of Cashflow Statement

The statement prepared by the business entity providing the information regarding all the transactions that increase or decrease the cash balance is known as the cash flow statement. Such a statement is prepared in three sections.

02

Use of worksheet in preparation of the statement of cash flows

The worksheet is desirable in the preparation of the statement of the cash flow because it provides a proper classification of all the data that will be reported in the statement of the cash flow. Although it is an option it provides aids in the preparation of the cash flow.

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Most popular questions from this chapter

Following are selected statement of financial position accounts of Sander Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.

Selected statement of financial position accounts

2017

2016

Increase

(Decrease)

Assets

Property, plant, and equipment

\(277,000

\)247,000

\(30,000

Accumulated depreciation

(178,000)

(167,000)

(11,000)

Accounts receivable

34,000

24,000

10,000

Equity and liabilities

Share capitalโ€”ordinary, \)1 par

\( 22,000

\) 19,000

\( 3,000

Share premiumโ€”ordinary

9,000

3,000

6,000

Retained earnings

104,000

91,000

13,000

Bonds payable

49,000

46,000

3,000

Dividends payable

8,000

5,000

3,000

Selected income statement information for the year ended December 31, 2017

Sales revenue

\)155,000

Depreciation

38,000

Gain on sale of equipment

14,500

Net income

31,000

Additional information:

  1. During 2017, equipment costing \(45,000 was sold for cash.
  2. Accounts receivable relate to sales of merchandise.
  3. During 2017, \)25,000 of bonds payable were issued in exchange for property, plant, and equipment.

There was no amortization of bond discount or premium.

Instructions Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.

  1. Payments for purchase of property, plant, and equipment.
  2. Proceeds from the sale of equipment.
  3. Cash dividends paid.
  4. Redemption of bonds payable.

Bloom Corporation had the following 2017 income statement.

Sales revenue

\(200,000

Cost of goods sold

120,000

Gross profit

80,000

Operating expenses (including depreciation of \)21,000)

50,000

Net income

\(30,000

The following accounts increased during 2017: Accounts Receivable \)12,000, Inventory \(11,000, and Accounts Payable \)13,000. Prepare the cash flows from the operating activities section of Bloomโ€™s 2017 statement of cash flows using the direct method.

Question: CA23-5 (Purpose and Elements of SCF) GAAP requires the statement of cash flows be presented when financial statements are prepared.

Instructions

(a) Explain the purposes of the statement of cash flows.

(b) List and describe the three categories of activities that must be reported in the statement of cash flows.

(c) Identify and describe the two methods that are allowed for reporting cash flows from operations.

(d) Describe the financial statement presentation of noncash investing and financing transactions. Include in your description an example of a noncash investing and financing transaction.

What is the purpose of the statement of cash flows? What

information does it provide?

Moxley Corporation had January 1 and December 31 balances as follows.

1/1/17 12/31/17

Inventory \(95,000 \)113,000

Accounts payable 61,000 69,000

For 2017, cost of goods sold was $500,000. Compute Moxleyโ€™s 2017 cash payments to suppliers.

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