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. Direct Method: It refers to preparation of cash flow statement by converting the accrual basis into cash basis by adjusting each line item as indirect method This method ignore the items like, depreciation , amortization etc as it include only cash transaction. For ex cash received from debtors, interest paid in cash, payment of cash to supplier and so on. 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 and so on 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 and so on. Following is the cash flow statement using direct method: Cash flow statement of Cuthbert Cookware Distributors Incorporation For the year ended 31 December Cash flow from operating activities Amounts($) Cash collected from customer 2,340,000 Less: Cash paid for merchandise (1,474,050) Less: Cash paid to other suppliers (1,110,000) Less: Cash paid for interest (5,000) 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 Long term debt paid (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 balance of cash 600,000 Closing balance of cash 107,500 Table (1) The above table shows the value from operation by cash inflows which are received from customer and deduct all expense and purchase made. Hence, Cash used in operating activities is ($249,050). The cash flow from investing activities is $262,500 and from financing activities is ($505,950). The addition of all these three reflects net increase or decrease in cash. Therefore, net decrease in cash is ($492,500) which is to be deducted from opening balance of cash of $600,000...

Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition

1st Edition

ISBN: 9780134047430

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

Publisher: PEARSON

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Chapter 22, Problem 22.16E

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

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Chapter 22, Problem 22.15E

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Chapter 22 Solutions

Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value 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

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

Solution Summary: The author explains the direct method of cash flow statement for the current year of Cuthbert Cookware Distributors Incorporation.

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

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