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) To Prepare: The cash flows from operating activities sections of the statement of cash flows using indirect method.

Question

Regal Properties (RP) just acquired land and a building for a single sum of $500,000. An independent appraisal determined the fair values of the assets (if purchased separately) at $350,000 for the land and $250,000 for the building. Prepare the journal entry in table format to record the purchase of the land and building.

Answer 1

Question

Chapter 14, Problem 14.16EX

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)

To Prepare: The cash flows from operating activities sections of the statement of cash flows using indirect method.

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