Explanation Cash Flow Statement: It is a financial statement which gives information about company’s cash inflows and outflows during an accounting year. It tells the cash position of the company and shows from where company generates its cash and how they used in the business. Indirect Method: This method is easy as it starts with net profit and makes necessary adjustment by converting accrual basis into cash basis. Firm make adjustment by adding back all the non cash expenses like depreciation , provision for losses on accounts receivable and similarly reduce non cash revenues and gains from the net profit. Operating Activities: It is the first part of cash flow statement It focus on inflow and outflow of cash from enterprise main.business operation like purchasing and selling of goods and services. It excludes longterm capital or investment costs. Investing Activities: It is the second part of cash flow statement It focus on cash flow related to purchasing and selling of long term assets of the firm like plant, building, machinery. Financing Activities : It is the third part of cash flow statement It focus on cash flow related to change in size and composition of equity and debt capital of the company like issue of share and debenture, payment of dividend. Following is the cash flow statement using indirect method: Cash flow statement of Cuthbert Cookware Distributors Incorporation For the year ended 31 st December Cash flow from operating activities Amounts($) Net loss (12,500) Adjustment to reconcile net loss to net cash provided by operating activities Add: Loss on sale on investment 37,500 Add: Bad debt expenses 10,000 Net changes in operating working capital Less: Increase in accounts receivable (460,000) Less: Decrease in inventory 225,000 Add: Increase in accounts payable 175,950 Less: Decrease in accrued liabilities (225,000) Net cash used in operating activities (249,050) Cash flow from investing activities Sold held to maturity investment 262,500 Net cash used in investing activities 262,500 Cash flow from financing activities Payment of long term debt (150,000) Cash dividend paid (225,000) Acquired treasury stock (130,950) Net cash used in financing activities (505,950) Decrease in cash for the year (492,500) Opening cash balance of cash 600,000 Closing cash balance of cash 107,500 Table (1) So, the cash flow from operating activities is ($249,050) after adjusting noncash items and net changes in operating working capital The cash flow from investing activities is 262,500 and from financing activities is ($505,950)...

Intermediate Accounting, Student Value Edition (2nd Edition)

2nd Edition

ISBN: 9780134732145

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

See similar textbooks

Question

Chapter 22, Problem 22.15E

To determine

Cash flow statement for the current year of CCDI using indirect method.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 22, Problem 22.11E

Chapter 22, Problem 22.16E

Students have asked these similar questions

Please give me correct answer this financial accounting question

Compute the following requirements for this financial accounting question

What is the firm's debt equity ratio on these financial accounting question?

Chapter 22 Solutions

Intermediate Accounting, Student Value Edition (2nd Edition)

Ch. 22 - Prob. 22.1Q Ch. 22 - Prob. 22.2Q Ch. 22 - Prob. 22.3Q Ch. 22 - Prob. 22.4Q Ch. 22 - Prob. 22.5Q Ch. 22 - How do firms reclassify gains and losses on the...Ch. 22 - Prob. 22.7Q Ch. 22 - Prob. 22.8Q Ch. 22 - Prob. 22.9Q Ch. 22 - Prob. 22.10Q

Knowledge Booster

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

Financial Accounting Intro Concepts Meth/Uses
Finance
ISBN:9781285595047
Author:Weil
Publisher:Cengage
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
College Accounting (Book Only): A Career Approach
Accounting
ISBN:9781337280570
Author:Scott, Cathy J.
Publisher:South-Western College Pub
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning