True of false:
1. if a company uses the direct method of calculating net cash flows from operating activities, it must adjust net income for gains or losses when selling property when selling property, plant, & equipment
2. when preparing the operating activities section of the statement of cash flows using the indirect method, an increase in income taxes payable is added to net income
3. the issuance of a stock dividend is a cash outflow in the financing activities section of the statement of cash flows
4. when calculating net cash flow from financing activities using the direct method, a company mist convert interest expense to cash paid for interest
please explain
Please find below the solution
Statement if FALSE 1. if a company uses the direct method of calculating net cash flows from operating activities, it must adjust net income for gains or losses when selling property when selling property, plant, & equipment
When direct method is used than no adjustment for profit and loss from property plant and equipment is required.
Statement is TRUE : 2. when preparing the operating activities section of the statement of cash flows using the indirect method, an increase in income taxes payable is added to net income
we need to factor only cash inflow or outflow in cash flow statement. If we are using indirect method we need to adjust change in working capital account and therefore tax payable as well.
Statement is FALSE 3. the issuance of a stock dividend is a cash outflow in the financing activities section of the statement of cash flows
Issuance of stock dividend is not a cash item therefore should not be part of cash flow statement.
Statement is TRUE : 4. when calculating net cash flow from financing activities using the direct method, a company mist convert interest expense to cash paid for interest
We need to report interest paid and not interest expenses accrued. therefore we need to convert interest expenses to cash paid .
True of false: 1. if a company uses the direct method of calculating net cash flows from operating activities, it must adjust net income for gains or losses when selling property when selling property...
Why are gains and losses from asset sales removed from net income when calculating the cash flows from operating activities? a. Selling assets is a noncash item. b. Gains and losses from asset sales are a financing activity. c. Gains and losses are not removed from net income when calculating the cash flows from operating activities d. The entire proceeds from sales of long-lived assets are included in investing activities.
Cash flows from operating activities-direct method Instructions Amount Descriptions Statement of Cash Flows-Operating Activities Instructions Sales $445,100.00 2 Cost of merchandise sold 157,900.00 5 Gross profit $287,200.00 Operating expenses: Depreciation expense $38,300.00 116,190.00 Other operating expenses Total operating expenses 154,490.00 Income before income tax $132,710.00 Income tax expense 40,590.00 $92,120.00 10 Net income Instructions Amount Descriptions Statement of Cash Flows-Operating Activities Instructions The balances of selected accounts at the beginning and the end of the current year are as follows:...
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Cash Flows from Operating Activities–Direct Method The income statement for Rhino Company for the current year ended June 30 and balances of selected accounts at the beginning and the end of the year are as follows: $445,500 (154,000) $291,500 Sales Cost of goods sold Gross profit Operating expenses: Depreciation expense Other operating expenses Total operating expenses $38,500 115,280 Income before income tax (153,780) $137,720 (39,600) $98,120 Income tax expense Net income End of Year Beginning of Year Accounts receivable (net)...
The impact of gains and losses are eliminated from net income because the cash flows associated with these gains and losses are either investing or financing activities and are reported in those sections of the Statement of Cash Flows. True False
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Cash Flows from Operating Activities - Indirect Method The net income reported on the income statement for the current year was $213,300. Depreciation recorded on equipment and a building amounted to $63,800 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $59,510 $61,890 Accounts receivable (net) 75,460 76,370 Inventories 148,780 131,580 Prepaid expenses 8,270 8,730 Accounts payable (merchandise creditors)...
Cash Flows from Operating Activities-Indirect Method Operating Activities Indirect Method The net income reported on the income statement for the current year was $146,300. Depreciation recorded on store equipment for the year amounted to $24,100. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $56,760 $52,220 Accounts receivable (net) 40,700 38,590 Merchandise inventory 55,570 58,750 6,240 4,960 Prepaid expenses Accounts payable (merchandise...
Cash Flows from Operating Activities Indirect Method The net income reported on the income statement for the current year was $144,200. Depreciation recorded on store equipment for the year amounted to $23,800. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $58,830 $53,540 Accounts receivable (net) 42,180 39,570 Merchandise Inventory 57,590 60,230 Prepaid expenses 6,470 5,090 Accounts payable (merchandise creditors) 55,120 50,650...