Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 14: Q14-5RQ (page 768)

Question: Describe the two formats for reporting operating activities on the statement of cash flows.

Short Answer

Expert verified

Answer

The two formats for reporting operating activities on the statement of cash flows are:

  1. Direct method
  2. Indirect method

Step by step solution

01

Direct method of reporting operating activities

Particulars

Amount

Receipts:

Collection from debtors

Interest revenue received

Dividends received on investments

Total Cash receipts(a)

XXX

Payments:

To suppliers

To employees

For Interest

For tax

Total cash payments (b)

XXX

Net cash provided/(Used) by operating activities (a) – (b)

02

Indirect method of reporting operating activities

Particulars

Adjustments

Net Income

Depreciation, Depletion, and Amortization Expense

Increase

Gains on Disposal of Long-term Assets

Decrease

Losses on Disposal of Long-term Assets

Increase

Increases in Current Assets other than Cash

Decrease

Decreases in Current Assets other than Cash

Increase

Increases in Current Liabilities

Increase

Decreases in Current Liabilities

Decrease

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Why might a spreadsheet be helpful when completing the statement of cash flows?

Question: Describe the three basic types of cash flow activities.

Question: Owl, Inc.’s accountants have assembled the following data for the year ended December 31, 2018: Cash receipt from sale of equipment \( 20,000

Depreciation expense 12,000

Cash payment of dividends 4,000

Cash receipt from issuance of common stock 12,000

Net income 30,000

Cash purchase of land 25,000

Increase in current liabilities 10,000

Decrease in current assets other than cash 8,000

Prepare Owl’s statement of cash flows using the indirect method for the year ended December 31, 2018. Assume beginning and ending Cash are \)12,000 and $75,000 respectively

Computing cash flow items—direct method Consider the following facts:

  1. Beginning and ending Accounts Receivable are \(24,000 and \)20,000, respectively. Credit sales for the period total \(68,000.
  2. Cost of goods sold is \)77,000.
  3. Beginning Merchandise Inventory balance is \(29,000, and ending Merchandise Inventory balance is \)26,000.
  4. Beginning and ending Accounts Payable are \(12,000 and \)16,000, respectively.

Requirements

  1. Compute cash collections from customers.
  2. Compute cash payments for merchandise inventory

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?
See all solutions

Recommended explanations on Business Studies Textbooks

Financial Performance

Read Explanation

Corporate Finance

Read Explanation

Business Development

Read Explanation

Nature of Business

Read Explanation

Influences On Business

Read Explanation

Change Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free