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Chapter 14: Q-14-2RQ (page 768)
Question: How does the statement of cash flows help users of financial statements?
Answer
The statement of cash flows helps users in various ways such as comparison with other firms in operating efficiency, liquidity, and solvency, reconciliation of cash balance, etc
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Use the Rouse Exercise Equipment data in Exercises E14-23 and E14-24. Rouse plansto purchase a truck for \(23,000 and a forklift for \)125,000 next year. In addition, itplans to pay cash dividends of $3,500. Assuming Rouse plans similar activity for 2019,what would be the amount of free cash flow?
Question: If current liabilities increase, what is the effect on cash? What about a decrease in current liabilities?
Question: Computing cash flows from investing and financing activities Use the data in Short Exercise S14-5 to complete this exercise. Prepare Winding Road Cellular’s statement of cash flows using the indirect method for the year ended April 30, 2018. Assume beginning and ending Cash are \(48,000 and \)52,200, respectively.
Computing operating activities cash flow—indirect method
The records of Vintage Color Engraving reveal the following:
Net income \( 36,000
Depreciation expense \) 5,000
Sales revenue 53,000
Decrease in current liabilities 19,000
Loss on sale of land 4,000
Increase in current assets other than cash 10,000
Acquisition of land 35,000
Compute cash flows from operating activities by the indirect method for year ended December 31, 2018.
Preparing the statement of cash flows—indirect method with non-cash transactions the 2018 income statement and comparative balance sheet of Rolling Hills, Inc. follow:
Additionally, Rolling Hills purchased land of \(21,100 by financing it 100% with long-term notes payable during 2018. During the year, there were no sales of land, no retirements of stock, and no treasury stock transactions. A plant asset was disposed of for \)0. The cost and the accumulated depreciation of the disposed asset was $13,410. The plant acquisition was for cash.
Requirements
1. Prepare the 2018 statement of cash flows, formatting operating activities by the indirect method.
2. How will what you learned in this problem help you evaluate an investment?
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