Accounting Ch 12
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
