Accounting Ch 12

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Most companies report operating cash flows using the

Indirect Method

A company reported that its bonds with a par value of $40,000 and a carrying value of $52,000 are retired for $60,000 cash, resulting in a loss of $8,000. The amount to be reported under cash flows from financing activities is _____.

$(60,000)

A machine with a cost of $100,000 and accumulated depreciation of $98,000 is sold for $70,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is _____.

$70,000

Decrease in current assets

Add to Net Income

Expenses with no cash outflows (such as depreciation expense)

Add to Net Income

Increases in current liabilities

Add to Net Income

Decreases in current liabilities

Deduct from Net Income

Nonoperating gains

Deduct from Net Income

Borrowed cash from bank by signing a long-term note payable

Financing Activity

Paid cash dividend to shareholders

Financing Activity

Paid cash to retire bonds payable

Financing Activity

Converted preferred stock to common stock

Noncash Investing and Financing Activity

Nonoperating losses

Add to Net Income

The net cash amount provided by operating activities using the direct method is ____________ that computed using the indirect methods

Always identical to

The FASB recommends that the operating activities section of the statement of cash flows be reported using the

Direct method

Net income is reconstructed on a cash basis when the ___________ method is used to report the net cash flows provided (used) by operating activities

Indirect Method

Collected cash from sale of equipment

Investing Activity

Paid cash to purchase a patent

Investing Activity

Paid cash to purchase long-term investment securities

Investing Activity

Collected cash from customers on account

Operating Activity

Collected dividends on investments in securities

Operating Activity

Paid cash to purchase inventory

Operating Activity

Paid employees for salaries and wages

Operating Activity

Paid interest on bonds payable

Operating Activity


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