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.
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.
