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. Cash flows from operating activities: These are the cash produced by the normal business operations. Indirect method: Under this method, the following amounts are to be adjusted from the Net Incometo calculate the net cash provided from operating activities . 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 To Determine: The major advantage of the indirect method of reporting cash flows from operating activities.

Question

Want to see the full answer?

Answer 1

Question

Chapter 16, Problem 2DQ

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.

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

Indirect method: Under this method, the following amounts are to be adjusted from the Net Incometo calculate the net cash provided from operating activities.

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

To Determine: The major advantage of the indirect method of reporting cash flows from operating activities.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Monie, an individual taxpayer, owns 50% of Monie & Co, an S Corporation. At the beginning of 20X4, Monie's basis in Monie & Co stock was $55,000. During 20X4, Monie & Co realized an ordinary loss in the amount of $45,000 and a short-term capital loss of $15,000. Monie & Co made total distributions of $70,000 to its shareholders during this taxable year. What amount of the $70,000 distribution is taxable to Monie?

Solid Company manufactures and sells specialty items. The following representative direct labor- hours and production costs are provided for a four-month period: Month Hrs. Direct Labor Production January 3,000 $ 45,000 February 4,000 52,500 March 7,000 81,000 April 4,000 45,000 Total 18,000 $2,23,500 a = fixed production costs per month variable production costs per direct labor hour n = number of months X = direct labor-hours per month Y equals total monthly production costs Using the symbols above, indicate the cost estimation equation based on number of direct labor hours per month, and calculate total monthly production costs for May using the high-low method, assuming the direct labor hours for May are expected to be 4,500.

Please help me this question general accounting