Chapter 13, Problem 13.9AP

To determine

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.

Cash flow from investing activities: This section of cash flows statement provides information concerning about the purchase and sale of capital assets by the company.

• Deduct the amount of cash used to purchase any fixed assets.
• Add the amount of cash received from sale of any fixed asset.

Cash flow from financing activities: This section of cash flows statement provides information about the cash inflow and outflow as a result of issuance and financing of debt, issue of new stock and payment of dividends.

• Add the amount of cash received from any sources of finance.
• Deduct the amount of cash used for payment for dividend and interest from financing activities.

• Deduct the amount of cash used for payment of treasury stock from financing activities.

To Prepare: Statement of cash flows of Company C using indirect method.