Chapter 12, Problem 12.1EYCT

(a)

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.

Indirect method: Under this 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.
• Deduct decrease in current liabilities.
• Add decrease in current assets.
• Add the 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 determine: the amount of net cash provided by operating activities of Incorporation A.

(b)

To determine

the amount of amount of increase or decrease in cash and cash equivalents of Incorporation A.

(c)

To determine

the method of computing net cash provided by operating activities of Incorporation A.

(d)

To determine

the amount of increase or decrease in Accounts receivable, inventory and accounts payable.

(e)

To determine

the amount of net cash used by investing activities of Incorporation A.

(f)

To determine

the amount of interest paid and amount of income taxes paid of Incorporation A.