Concept explainers
MANAGING YOUR WRITING
Direct Method
A friend of yours was looking at a schedule for the calculation of cash generated from operating activities prepared under the direct method and asked why
Indirect Method
A friend of yours was reading a statement of
Want to see the full answer?
Check out a sample textbook solutionChapter 23 Solutions
College Accounting, Chapters 1-27
- Preparing a Statement of Cash Flows-Direct Method The controller of Newstrom Software Inc. provides the following information as the basis for a statement of cash flows: Required: 1. Calculate the net cash provided (used) by operating activities. 2. Calculate the net cash provided (used) by investing activities. 3. Calculate the net cash provided (used) by financing activities.arrow_forwardMonserrate is preparing the statement of cash flows for Kohler Inc. Monserrate needs to classify cash transactions by the type of activity. How should Monserrate classify a cash transaction for capital expenditures or expenditures in property, plant, and equipment in the statement of cash flows?arrow_forwardUsing the following information, complete an indirect method SCF in good form. The SCF should be presented in the worksheet labeled "Statement of Cash Flows". Record the journal entry for the sale of equipment to determine the cash effect of this transaction If ending cash on the SCF doesn't equal ending cash per the Balance Sheet, you've made a mistake somewhere. To find the error, recheck your work once, then redo the problem if you can't find your error. Use T accounts to analyze Investing Section (LT Assets) and Financing Section (LT Liabilities & Equity) for SCF ------------ Martinez Inc Balance Sheet and Income Statement Data 12/31/2025 12/31/2024 Current Assets: Cash $ 5,900 $ 6,900 Accounts Receivable 61,400 51,200 Inventory 45,200 63,800 Total Current Assets 112,500 121,900 PPE 152,700 130,200 Accumulated Depreciation (35,400) (25,000) Land 80,400 67,900 Total Assets $ 310,200 $ 295,000 Current Liabilities: Accounts Payable $…arrow_forward
- Help Save & Exit Which of the following items do we report in the statement of cash flows using the direct method? Multiple Choice 39 19 Depreciation expense. Cash paid to suppliers. Gain on sale of an asset. Loss on sale of an asset. C raw hparrow_forwardPrepare the operating section of the statement of cash flows Thank you for your help the photos has the information and the format they need to do the questionarrow_forwardHow do ledger and journal entries interact with one another? Explain how the ledger provides the information needed to prepare the balance sheet. Distinguish between a temporary and a permanent account. Explain how the ledger provides the information needed to prepare the operating statement. What is the main purpose of the statement of cash flows? What are the three categories used within the statement of cash flows? Why are these categories important for understanding an organization's cash situation? Differentiate between the direct and the indirect methods for preparing and presenting the statement of cash flows. Explain why health care organizations need both an operating statement and a cash flow statement.arrow_forward
- I know in order to find the cash flow from operating activities using the indirect method you start with the net income then add your depreciation expense and your loss on disposal equipment. Then you subtract increases in account receivable and decrease in account receivable and that gives you your net income. However, when I compute this it says all my answers are incorrect. I thought I was doing this correctly but clearly I need assistance.arrow_forwardWhich of the following is an example of a cash outflow from an investing activity? Multiple Choice Payment of cash for inventory. Payment of cash for the purchase of land. Payment of cash for treasury stock. Payment on a long-term note payablearrow_forwardCash receipts from royalties, fees, commissions, and other revenues are classified on the statement of cash flows as Cash inflows from operating activities O Cash inflows from investing activities Cash outflows for financing activities O Cash outflows for investing activitiesarrow_forward
- Please give me an information about : cash reciepts, capital investments, loans, interest payment, pre-operating and admin costarrow_forwardWhy are financial statement users interested in the statement of cash flows? O It provides information about an important company resource. It is the first statement that is presented to users. It is the easiest financial statement to evaluate. It helps users decide whether assets such as office equipment should be replaced.arrow_forwardNeed to compute cash flows from operating activities for each case using the direct method. I need to solve for cash collected from customers, cash payments to suppliers, cash payments for salaries and wages, and net cash provided by operating activities. Here are the numbers for these cases: Case A Case B Case C Sales revenue $74,000 64,000 $105,000 Cost of goods sold 39,500 30,500 70,300 Depreciation expense 10,900 2,900 26,900 Salaries and wages expense 5,900 13,900 8,900 Net income (loss) 17,700 16,700 (1,100 Accounts receivable increase (decrease) (1,000 4,900 3,900 Inventory increase (decrease) 2,900 0 (3,900 Accounts payable increase (decrease) 0 3,400 (1,000 Salaries and wages payable increase (decrease) 1,950 (2,900 1,000arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning