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Chapter 14: Q14-3RQ (page 768)
Question: Describe the three basic types of cash flow activities.
Answer
The three basic types of cash flow activities are operating activity, investing activity, and financing activity.
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Question: Explain why depreciation expense, depletion expense, and amortization expense are added to net income in the operating activities section of the statement of cash flows when using the indirect method.
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.
Identify each item as operating (O), investing (I), financing (F), or non-cash (N).
1. Cash receipt from the sale of equipment
2. Cash payment for salaries
3. Cash receipt from the collection of long-term notes receivable
4. Purchase of equipment in exchange for notes payable
5. Cash receipt from the issuance of common stock
Question: Computing investing and financing cash flows Preston Media Corporation had the following income statement and balance sheet for 2018:
PRESTON MEDIA CORPORATION
Income Statement
Year Ended December 31, 2018
Sales Revenue \(80,000
Depreciation Expense鈥撯�揚lant Assets \)11,000
Other Expenses \(50,000
Net Income \)19,000
Requirements
1. Compute the acquisition of plant assets for Preston Media Corporation during 2018. The business sold no plant assets during the year. Assume the company paid cash for the acquisition of plant assets.
2. Compute the payment of a long-term note payable. During the year, the business issued a $4,400 note payable.
The 2018 comparative balance sheet and income statement of Appleton Group, Inc. follow. Appleton disposed of a plant asset at book value during 2018
Prepare the spreadsheet for the 2018 statement of cash flows. Format cash flows from operating activities by the indirect method. A plant asset was disposed of for \(0. The cost and accumulated depreciation of the disposed asset was \)11,600. There were no sales of land, no retirement of common stock, and no treasury stock transactions. Assume plant asset and land acquisitions were for cash.
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