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To compare statement of cash flows reporting under the direct andindirect methods, select "Direct", "Indirect" or "Both" indicatingthe method in which the line items are reported on the statement ofcash flows.

Cash Flows (and Related Changes) Statement of Cash FlowsMethod
1. Net income
2. Receipts from customers
3. Accounts receivable increase or decrease
4. Payments to suppliers
5. Inventory increase or decrease
6. Accounts payable increase or decrease
7. Payments to employees
8. Wages payable, increase or decrease
9. Depreciation expense
10. Cash flows from operating activities
11. Cash flows from investing activities
12. Cash flows from financing activities
13. Net increase or decrease in cash during the period

* you are going to get statement of cash flows method(choose one ofdirect, indirect, both)

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Deanna Hettinger
Deanna HettingerLv2
28 Sep 2019

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Related questions

Kennedy, Inc. reported the following data:

Net income $127,659
Depreciation expense 16,038
Loss on disposal of equipment 11,080
Gain on sale of building 18,917
Increase in accounts receivable 7,995
Decrease in accounts payable 3,476
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. Use the minus sign to indicate cash outflows, a decrease in cash, cash payments, or any negative adjustments.

Kennedy, Inc.
Statement of Cash Flow

Cash flows from operating activities:
Net income
$
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense

Loss on disposal of equipment

Gain on sale of building

Changes in current operating assets and liabilities:
Increase in accounts receivable

Decrease in accounts payable

Net cash flow from operating activities

The net income reported on the income statement for the currentyear was $364,000. Depreciation recorded on store equipment for theyear amounted to $14,500. Balances of the current asset and currentliability accounts at the beginning and end of the year are asfollows:

End of Year

Beginning of Year
Cash $43,210 $38,400
Accounts receivable (net) 31,360 29,020
Merchandise inventory 39,590 45,160
Prepaid expenses 4,740 3,670
Accounts payable (merchandise creditors) 41,480 35,590
Wages payable 21,910 22,970

Required:

A. Prepare the Cash Flows from Operating Activities section of thestatement of cash flows, using the indirect method. Refer to theAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign to indicatecash outflows, cash payments, decreases in cash and for anyadjustments, if required.

B

Amount Descriptions
Amortization of intangible assets
Decrease in accounts payable
Decrease in accounts receivable
Decrease in merchandise inventory
Decrease in prepaid expenses
Decrease in wages payable
Depreciation
Increase in accounts payable
Increase in accounts receivable
Increase in merchandise inventory
Increase in prepaid expenses
Increase in wages payable
Net cash flow from operating activities
Net cash flow used for operating activities
Net income

Net loss

A. Prepare the Cash Flows from Operating Activities section ofthe statement of cash flows, using the indirect method. Refer tothe Amount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign to indicatecash outflows, cash payments, decreases in cash and for anyadjustments, if required.

Statement of Cash Flows (partial)

1

Cash flows from operatinactivities:

2

3

Adjustments to reconcile net income to net cash flow fromoperating activities:

4

5

Changes in current operating assets and liabilities:

6

7

8

9

10

11

1) If salaries payable was $75,000 at the beginning of the yearand $40,000 at the end of the year, should $35,000 be added to ordeducted from income to determine the amount of cash flows fromoperating activities by the indirect method? Explain.

2) A long-term investment in bonds with a cost of $800,000 wassold for $910,000 cash. (a) What was the gain or loss on the sale?(b) What was the effect of the transaction on cash flows? (c) Howshould the transaction be reported in the statement of cash flowsif cash flows from operating activities are reported by theindirect method?

3) For the current year, Bearings Company decided to switch fromthe indirect method to the direct method for reporting cash flowsfrom operating activities on the statement of cash flows. Will thechange cause the amount of net cash flow from operating activitiesto be (a) larger, (b) smaller, or (c) the same as if the indirectmethod had been used? Explain.

4) Name five common major classes of operating cash receipts oroperating cash payments presented on the statement of cash flowswhen the cash flows from operating activities are reported by thedirect method.

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