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Chapter 14: Q14-12RQ (page 769)

Question: What accounts on the balance sheet must be evaluated when completing the financing activities section of the statement of cash flows?

Short Answer

Expert verified

Answer

Financing activity records transactions related to long-term liabilities and equity.

Step by step solution

01

Evaluating T-accounts of long-term liabilities 

While computing cash generated from or used for financing activitiesit is important to evaluate the T-accounts of each long-term liability. Opening and closing balances of each long-term liability can be directly picked up from the balance sheet

02

Evaluating T-accounts of equity 

Issuance of new common stock, Buy-back of existing common stock, dividend paid, etc. are a few examples of transactions that should be recorded while computing cash flow from financing activity.

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Most popular questions from this chapter

Preparing the direct method statement of cash flows Use the data in Short Exercise S14A-12 and your results. Prepare the business鈥檚 complete statement of cash flows for the year ended June 30, 2018, using the direct method for operating activities.

Question: How does the direct method differ from the indirect method when preparing the operating activities section of the statement of cash flows?

Preparing operating activities using the direct method Amy鈥檚 Learning Center has assembled the following data for the year ended June 30, 2018:

Payments to suppliers $ 115,000

Cash payment for purchase of equipment 39,000

Payments to employees 66,000

Payment of notes payable 34,000

Payment of dividends 7,500

Cash receipt from issuance of stock 22,000

Collections from customers 188,000

Cash receipt from sale of land 58,000

Cash balance, June 30, 2017 41,000 Prepare the operating activities section of the business鈥檚 statement of cash flows for the year ended June 30, 2018, using the direct method.

Question: Preparing the statement of cash flows鈥攄irect method The income statement and additional data of Value Corporation follow:

  1. Collections from customers are \(13,000 more than sales.
  2. Dividend revenue, interest expense, and income tax expense equal their cash amounts.
  3. Payments to suppliers are the sum of cost of goods sold plus advertising expense.
  4. Payments to employees are \)3,000 more than salaries expense.
  5. Cash payment for the acquisition of plant assets is \(102,000.
  6. Cash receipts from sale of land total \)29,000.
  7. Cash receipts from issuance of common stock total \(38,000.
  8. Payment of long-term notes payable is \)10,000.
  9. Payment of dividends is \(9,000.
  10. Cash balance at June 30, 2017, was \)21,000; at June 30, 2018, it was $43,000.

Prepare Value Corporation鈥檚 statement of cash flows for the year ended June 30, 2018. Use the direct method.

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