Chapter 12, Problem 14E

To determine

(a)

Introduction:

Statements of cash flows are the statements that help in determining how the changes in balance sheet and income statement affect the cash and cash equivalents. Operating activities, investing activities and financing activities are the three activities reported on the statement of cash flows.

To report:

The amount related to inventory that is deducted by each company on the income statement.

To determine

(b)

Introduction:

Statements of cash flows are the statements that help in determining how the changes in balance sheet and income statement affect the cash and cash equivalents. Operating activities, investing activities and financing activities are the three activities reported on the statement of cash flows.

To report:

The amount spent by the company related to inventory purchased with cash and on account.

To determine

(c)

Introduction:

Statements of cash flows are the statements that help in determining how the changes in balance sheet and income statement affect the cash and cash equivalents. Operating activities, investing activities and financing activities are the three activities reported on the statement of cash flows.

To report:

The difference between cost of goods sold and total cash paid for inventory.

To determine

(d)

Introduction:

Statements of cash flows are the statements that help in determining how the changes in balance sheet and income statement affect the cash and cash equivalents. Operating activities, investing activities and financing activities are the three activities reported on the statement of cash flows.

To report:

The changes in company’s inventory and accounts payable.

To determine

(e)

Introduction:

The indirect method helps the company to convert accrual basis of accounting to cash basis by adjusting the net income. It can be done by adding back non-cash expenses such as depreciation on fixed asset, amortization, bad debts written off and any losses on the sale of a fixed asset and by subtracting net income such as profit from sale of asset, dividend received.

To report:

The amount that needs to be added or deducted from net income under indirect method.

To determine

(f)

Introduction:

Statements of cash flows are the statements that help in determining how the changes in balance sheet and income statement affect the cash and cash equivalents. Operating activities, investing activities and financing activities are the three activities reported on the statement of cash flows.

To state:

If there is any resemblance between requirement 3 and 5 with reason.