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Preparing the Operating Activities Section The following items are relevant to the preparation of a statement of cash flows for Maxwell Inc. 1. Net loss for the year was $28,000. Depreciation expense was $70,000. 2. Wrote off a $5,600 account. During the year, gross accounts receivable increased $140,000, and the allowance for doubtful accounts increased $14,000. All sales of $840,000 are on account. 3. Pension expense is $140,000 while funding for the pension plan was $112,000. 4. Deferred tax liability increased $112,000, income taxes payable decreased $28,000, and income tax expense was $308,000. 5. $28,000 of interest was capitalized. Interest expense is $140,000. There is no change in interest payable. 6. Sold short-term investments (not held in a trading account) at a $5,600 gain, proceeds $22,400. 7. Merchandise inventory decreased by $14,000, accounts payable decreased by $7,000, and salaries payable increased by $19,600. Required Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method). Note: If an item is not included in the operating activities section, leave the answer blank (zero). Cash flows from Operating Activities Net loss Adjustments: Depreciation expense Pension expense Income tax expense Capitalized interest Gain on sale of short-term investments Increase in accounts receivable Increase in deferred tax liability Decrease in income taxes payable Decrease in merchandise inventory Decrease in accounts payable Increase in salaries payable $ Net cash provided (used) by operating activities $

Preparing the Operating Activities Section The following items are relevant to the preparation of a statement of cash flows for Maxwell Inc. 1. Net loss for the year was $28,000. Depreciation expense was $70,000. 2. Wrote off a $5,600 account. During the year, gross accounts receivable increased $140,000, and the allowance for doubtful accounts increased $14,000. All sales of $840,000 are on account. 3. Pension expense is $140,000 while funding for the pension plan was $112,000. 4. Deferred tax liability increased $112,000, income taxes payable decreased $28,000, and income tax expense was $308,000. 5. $28,000 of interest was capitalized. Interest expense is $140,000. There is no change in interest payable. 6. Sold short-term investments (not held in a trading account) at a $5,600 gain, proceeds $22,400. 7. Merchandise inventory decreased by $14,000, accounts payable decreased by $7,000, and salaries payable increased by $19,600. Required Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method). Note: If an item is not included in the operating activities section, leave the answer blank (zero). Cash flows from Operating Activities Net loss Adjustments: Depreciation expense Pension expense Income tax expense Capitalized interest Gain on sale of short-term investments Increase in accounts receivable Increase in deferred tax liability Decrease in income taxes payable Decrease in merchandise inventory Decrease in accounts payable Increase in salaries payable $ Net cash provided (used) by operating activities $

Financial Accounting Intro Concepts Meth/Uses
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter6: Statement Of Cash Flows
Section: Chapter Questions
Problem 20E
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Preparing the Operating Activities Section The following items are relevant to the preparation of a statement of cash flows for Maxwell Inc. 1. Net loss for the year was $28,000. Depreciation expense was $70,000. 2. Wrote off a $5,600 account. During the year, gross accounts receivable increased $140,000, and the allowance for doubtful accounts increased $14,000. All sales of $840,000 are on account. 3. Pension expense is $140,000 while funding for the pension plan was $112,000. 4. Deferred tax liability increased $112,000, income taxes payable decreased $28,000, and income tax expense was $308,000. 5. $28,000 of interest was capitalized. Interest expense is $140,000. There is no change in interest payable. 6. Sold short-term investments (not held in a trading account) at a $5,600 gain, proceeds $22,400. 7. Merchandise inventory decreased by $14,000, accounts payable decreased by $7,000, and salaries payable increased by $19,600. Required Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method). Note: If an item is not included in the operating activities section, leave the answer blank (zero). Cash flows from Operating Activities Net loss Adjustments: Depreciation expense Pension expense Income tax expense Capitalized interest Gain on sale of short-term investments Increase in accounts receivable Increase in deferred tax liability Decrease in income taxes payable Decrease in merchandise inventory Decrease in accounts payable Increase in salaries payable $ Net cash provided (used) by operating activities $
Transcribed Image Text:Preparing the Operating Activities Section The following items are relevant to the preparation of a statement of cash flows for Maxwell Inc. 1. Net loss for the year was $28,000. Depreciation expense was $70,000. 2. Wrote off a $5,600 account. During the year, gross accounts receivable increased $140,000, and the allowance for doubtful accounts increased $14,000. All sales of $840,000 are on account. 3. Pension expense is $140,000 while funding for the pension plan was $112,000. 4. Deferred tax liability increased $112,000, income taxes payable decreased $28,000, and income tax expense was $308,000. 5. $28,000 of interest was capitalized. Interest expense is $140,000. There is no change in interest payable. 6. Sold short-term investments (not held in a trading account) at a $5,600 gain, proceeds $22,400. 7. Merchandise inventory decreased by $14,000, accounts payable decreased by $7,000, and salaries payable increased by $19,600. Required Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method). Note: If an item is not included in the operating activities section, leave the answer blank (zero). Cash flows from Operating Activities Net loss Adjustments: Depreciation expense Pension expense Income tax expense Capitalized interest Gain on sale of short-term investments Increase in accounts receivable Increase in deferred tax liability Decrease in income taxes payable Decrease in merchandise inventory Decrease in accounts payable Increase in salaries payable $ Net cash provided (used) by operating activities $
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