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 it is 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 and amortization as it includes only cash transaction. Indirect method: This method is easy as it starts with net profit and makes necessary adjustment by converting accrual basis into cash basis. Firms 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. Statement I: This statement explains that income statement is based on accrual accounting method whereas cash flow is based on cash basis...

3rd Edition

ISBN: 9780136912644

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

Publisher: Pearson Education (US)

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During its first month of operation, Peter's Auto Supply Corporation, which specializes the sale of auto equipment and supplies, completed the following transactions. July Transactions July 1 Issued Common Stock in exchange for $100,000 cash. July 1 Paid $4,000 rent for the months of July and August July 2 Paid the insurance company $2,400 for a one year insurance policy, beginning July 1. July 5 Purchased inventory on account for $35,000 (Assume that the perpetual inventory system is used.) July 6 Borrowed $36,500 from a local bank and signed a note. The interest rate is 10%, and principal and interest is due to be repaid in six months. July 8 Sold inventory on account for $17,000. The cost of the inventory is $7,000. July 15 Paid employees $6,000 salaries for the first half of the month. July 18 Sold inventory for $15,000 cash. The cost of the inventory was $6,000. July 20 Paid $15,000 to suppliers for the inventory purchased on January 5. July 26…

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Chapter 22 Solutions

Intermediate Accounting

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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