FUNDAMENTAL ACCT PRIN TEXT+CONNECT CODE
FUNDAMENTAL ACCT PRIN TEXT+CONNECT CODE
15th Edition
ISBN: 9781265564483
Author: Wild
Publisher: MCG
Question
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Chapter 16, Problem 4BTN
To determine

Introduction:

Cash Flow Statements:

• Cash flow statements are an integral part of the financial statements of a company. They reflect the direction and movement of the cash inflows and outflows during a reporting period. The cash inflows and outflows are segregated into the following activities:

Cash flows from Operating activities – The cash inflows refer to sales and income from operating activities and cash outflows include both cash and non-cash outflows from the operating activities i.e. the day to day activities of the business.

Cash flows from Investing activities – The cash inflows refer to sales and income from investing activities and cash outflows include cash outflows from the investing activities in the form of purchase of fixed assets and investments.

Cash flows from Financing activities – The cash inflows refer to income from financing activities such as raising share capital and debt and cash outflows include cash outflows from the financing activities in the form of dividends and interest paid.

There are two methods of preparing cash flow statements:

Direct Method – It measures the actual cash inflows and cash outflows that are affected during a particular reporting period. The actual cash flows do not include non-cash items and items that are recorded owing to the accrual principle.

Indirect Method –It measures the cash inflows and cash outflows that are affected during a particular reporting period including the non-cash items and items that are recorded owing to the accrual principle.

To Determine:

The purpose of preparation of the cash flow statements.

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Bella Brands operates with two divisions, Aftershave and Deodorant. The Aftershave Division produces a chemical that the Deodorant Division also uses. The Aftershave Division also sells this chemical to other firms for $27 per ounce. The cost information for the Aftershave Division is as follows:  Variable costs per ounce $ 6.00   Fixed costs per ounce $ 15.00   Monthly production capacity 30,000 ounces If the Aftershave Division is operating at full capacity and can sell all of the chemical that it can produce, what is the minimum transfer price that the Aftershave Division will accept?   Multiple Choice   None of the choices is correct.   $6.00 per ounce   $21.00 per ounce   $15.00 per ounce   $27.00 per ounce

Chapter 16 Solutions

FUNDAMENTAL ACCT PRIN TEXT+CONNECT CODE

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