Chapter 12, Problem 11Q

To determine

Statement of cash flows

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Cash flows from operating activities: These refer to the cash received or cash paid in day-to-day operating activities of a company.

Under indirect method, the following amounts are to be adjusted from the “net income”to calculate the net cash provided from operating activities.

• Deduct: Increase in current assets.
• Add: Decrease in current assets.
• Deduct: Decrease in current liabilities.
• Add: Increase in current liability.
• Add: Depreciation expense and amortization expense.
• Add: Loss on sale of plant assets.
• Less: Gain on sale of plant assets.

To describe: The necessary to convert accrual basis net income to cash basis net income when preparing statement of cash flows.