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) Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations. The below table shows the way of calculation of cash flows from investing activities: Cash flows from investing activities Add: Proceeds from sale of fixed assets Sale of marketable securities / investments Deduct: Purchase of fixed assets/long-lived assets Purchase of marketable securities Net cash provided from or used by investing activities Table (2) Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations. The below table shows the way of calculation of cash flows from financing activities: Cash flows from financing activities Add: Issuance of common stock Proceeds from borrowings Proceeds from issuance of debt Issuance of bonds payable Deduct: Payment of dividend Repayment of debt Interest paid Redemption of debt Repurchase of stock Net cash provided from or used by financing activities Table (3) Non-cash items: It refers to the investing and financing activities undertaken by the business without paying any cash. To Prepare: A Statement of Cash flow for A Company for the year December 31, 2016.

Question

Want to see the full answer?

Answer 1

Question

Chapter 21, Problem 21.18P

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)

Cash flows from investing activities: Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

The below table shows the way of calculation of cash flows from investing activities:

Cash flows from investing activities

Add: Proceeds from sale of fixed assets

         Sale of marketable securities / investments

Deduct: Purchase of fixed assets/long-lived assets

              Purchase of marketable securities

Net cash provided from or used by investing activities

Table (2)

Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities

Add: Issuance of common stock

          Proceeds from borrowings

          Proceeds from issuance of debt

          Issuance of bonds payable

Deduct: Payment of dividend

              Repayment of debt

              Interest paid

              Redemption of debt

              Repurchase of stock

Net cash provided from or used by financing activities

Table (3)

Non-cash items:

It refers to the investing and financing activities undertaken by the business without paying any cash.

To Prepare: A Statement of Cash flow for A Company for the year December 31, 2016.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Flare Enterprises sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $60 per unit. Flare management desires a 15% profit margin on sales. Their current full cost for the product is $52 per unit. In order to meet the new target cost, how much will the company have to cut costs per unit, if any?

At the beginning of the year, Ironclad Corp. had total assets of $920,000 and total liabilities of $610,000. During the year, total liabilities increased by $90,000 and stockholders' equity decreased by $45,000. What is the amount of total assets at the end of the year?

HELP