Statement of cash flows : It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing 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 . Cash flows from operating activities: These are the cash produced by the normal business operations. The below table shows the way of calculation of cash flows from operating activities: Cash flows from operating activities (Indirect method) Add: Decrease in current assets Increase in current liability Depreciation expense and amortization expense Loss on sale of plant assets Deduct: Increase in current assets Decrease in current liabilities Gain on sale of plant assets Net cash provided from or used by operating activities Table (1) Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations. The below table shows the way of calculation of cash flows from investing activities: Cash flows from investing activities Add: Proceeds from sale of fixed assets Sale of marketable securities / investments Interest received Dividend received Deduct: Purchase of fixed assets/long-lived assets Purchase of marketable securities Net cash provided from or used by investing activities Table (2) Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations. The below table shows the way of calculation of cash flows from financing activities: Cash flows from financing activities Add: Issuance of common stock Proceeds from borrowings Proceeds from issuance of debt Issuance of bonds payable Deduct: Payment of dividend Repayment of debt Interest paid Redemption of debt Repurchase of stock Net cash provided from or used by financing activities Table (3) To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

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Chapter 13, Problem 13.2APR

To determine

Statement of cash flows:

It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing 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.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)

Add: Decrease in current assets
         Increase in current liability
         Depreciation expense and amortization expense
         Loss on sale of plant assets

Deduct: Increase in current assets
              Decrease in current liabilities
              Gain on sale of plant assets
Net cash provided from or used by operating activities

Table (1)

Cash flows from investing activities:

Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets
         Sale of marketable securities / investments
         Interest received
         Dividend received

Deduct: Purchase of fixed assets/long-lived assets
              Purchase of marketable securities
Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock
          Proceeds from borrowings
          Proceeds from issuance of debt
          Issuance of bonds payable

Deduct: Payment of dividend
              Repayment of debt
              Interest paid
              Redemption of debt
              Repurchase of stock
Net cash provided from or used by financing activities

Table (3)

To Prepare: A statement of cash flows using the indirect method for presenting cash flows from operating activities.

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Selected comparative financial statements of Korbin Company follow. Sales KORBIN COMPANY Comparative Income Statements For Years Ended December 31 2021 2020 $ 512,008 $ 392,240 2019 $ 272,200 Cost of goods sold 308,229 245,542 174,208 Gross profit 203,779 146,698 97,992 Selling expenses 72,705 54,129 35,930 Administrative expenses 46,081 34,517 22,593 Total expenses 118,786 88,646 58,523 Income before taxes .84,993 58,052 39,469 Income tax expense 15,809 11,901 8,012 Net income $ 69,184 $ 46,151 $ 31,457 KORBIN COMPANY Comparative Balance Sheets Assets Current assets Long-term investments Plant assets, net Total assets Liabilities and Equity Current liabilities Common stock Other paid-in capital Retained earnings December 31 2021 2020 2019 $ 54,370 0 $ 36,390 600 $ 48,645 3,870 99,436 90,776 53,339 Total liabilities and equity $ 153,806 $ 127,766 $ 105,854 $ 22,456 $ 19,037 $ 18,524 68,000 68,000 50,000 8,500 8,500 5,556 54,850 32,229 31,774 $ 153,806 $ 127,766 $ 105,854