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Concept explainers
Statement of
Direct method: The direct method uses the cash basis of accounting for the preparation of the statement of cash flows. It takes into account those revenues and expenses for which cash is either received or paid.
Cash flows from operating activities: Cash flows from operating activity represent the net cash flows from the general operation of the business by comparing the cash receipt and cash payments.
The below table shows the way of calculation of cash flows from operating activities:
Cash flows from operating activities (Direct method) |
Add: Cash receipts. |
Cash receipt from customer |
Less: Cash payments: |
To supplier |
For operating expenses |
Income tax expenses |
Net cash provided from or used by operating activities |
To Prepare: Operating activities section of statement of cash flow under direct method.
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Chapter 14 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
- hello teacher please solve questionsarrow_forwardhello teacher please answerarrow_forwardRecently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What journal entry would Abercrombie & Fitch have made to write down its merchandise inventory during the year ended…arrow_forward
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