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Cash flow statement gives the information related to the
1.
a.
To explain: Object of the cash flow statement.
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Explanation of Solution
- Cash flow statement gives the information related to the cash receipt and cash payment of the company.
- It also gives the information related to change cash of operating activities, investing activities and financing activities.
b.
To explain: Similarity and difference between the direct and indirect method.
b.
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Explanation of Solution
- There are the two method two calculate the cash flow are direct and indirect method.
- Cash flow stamen from direct method starts from the sale and by indirect method stare form the net income of the company.
- Similarity in the both method is that both of these give the same answer of the cash inflow and outflow.
c.
To explain: Steps followed in the cash flow statement.
c.
![Check Mark](/static/check-mark.png)
Explanation of Solution
To make the cash flow statement 1st calculate the cash from the operating activities then investing activities and at the end cash flow from financing activities are calculated.
d.
To explain: Type of the information given by the cash flow statement.
d.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Cash flow statement analyses how much cash is coming from the operating, investing and financing activities to the company and from where these cash are coming.
2.
a.
To explain: Adjustment of the noncash operating revenue and expense in cash flow statement.
2.
a.
![Check Mark](/static/check-mark.png)
Explanation of Solution
- All the noncash expense is add in net income to get the cash from the operating activities.
- All the noncash revenue are deducted from the net income to get the correct cash flow from the operating activities.
b.
To explain: Adjustment of the noncash operating gain and loss.
b.
![Check Mark](/static/check-mark.png)
Explanation of Solution
In the cash flow stamen all the noncash gain are deducted from the net income and all the noncash loss are added in the net income.
c.
To explain: Increase and decrease in noncash current assets.
c.
![Check Mark](/static/check-mark.png)
Explanation of Solution
If the noncash current assets are increase then it is added and if the noncash assets decrease then it is added in the cash flow statement.
d.
To explain: Increase and decrease in noncash current assets.
d.
![Check Mark](/static/check-mark.png)
Explanation of Solution
If the noncash current liability is increase then it is deducted and if the noncash liability decreases then it is added in the cash flow statement.
3.
a.
To explain: Formula for cash collected from customer.
3.
a.
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Explanation of Solution
- To fine the cash collected from the customer, increase in the
account receivable is deducted from the sales revenue. - If the account receivable decrease during the year then account receivable are added in the sales revenue.
Formula to calculate the cash collected from the customer
b.
To explain: Formula for cash paid for inventory to supplier.
b.
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Explanation of Solution
To calculate the cash paid to the supplies decrease in the account payable are added to the cost of the goods sold and decrease in the inventory is detected from the cost of the goods sold and vise vase.
Formula to calculate the cash paid to supplies
c.
To explain: Formula for cash paid for wages and operating expense.
c.
![Check Mark](/static/check-mark.png)
Explanation of Solution
To calculate the cash paid wages and operating expanse decrease in prepaid expense and wages payable are deducted from the other expense and vice versa.
Calculate the cash paid for other expenses,
d.
To explain: Formula for cash paid for interest and taxes.
d.
![Check Mark](/static/check-mark.png)
Explanation of Solution
To calculate the cash paid for the interest and taxes, if the tax is increasing during the year then it will be added and if tax and interest is decreasing then it subtract.
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Chapter 12 Solutions
Managerial Accounting + Connect Access Card
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