Changes in Current Operating Assets and Liabilities—Indirect Method Victor Corporation's comparative balance sheet for current assets...

Changes in Current Operating Assets and Liabilities—Indirect Method Victor Corporation's comparative balance sheet for current assets and liabilities was as follows:

Dec. 31, Year 2		Dec. 31, Year 1
Accounts receivable	$20,000		$16,700
Inventory	70,000		78,700
Accounts payable	7,700		9,400
Dividends payable	27,000		25,000

Adjust net income of $111,900 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.

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Staley Inc. reported the following data:

Net income	$284,400
Depreciation expense	67,900
Loss on disposal of equipment	23,100
Increase in accounts receivable	25,600
Increase in accounts payable	11,100

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 out flows, cash payments, decreases in cash, or any negative adjustments.

Staley Inc.

Statement of Cash Flows (partial)

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash flow from operating activities:

Depreciation

Loss on disposal of equipment

Changes in current operating assets and liabilities:

Increase in accounts receivable

Increase in accounts payable

Net cash flow from operating activities

Alpha Corporation purchased land for $210,000. Later in the year, the company sold a different piece of land with a book value of $111,000 for $97,000.

How are the effects of these transactions reported on the statement of cash flows? Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required. If a transaction has no effect on the statement of cash flows, select "No effect" from the drop down menu and leave the amount box blank.

Transactions	Action	Amount
Gain or loss on sale of land		$
Cash received from sale of land		$
Cash paid for purchase of land		$

Solutions

Expert Solution


Answer a
Calculation of net cash flow from operating activities.
Net Income	$111,900
Changes in operating assets and liabilities
Increase in accounts receivables	-$3,300
Decrease in Inventory	$8,700
Decrease in Accounts Payable	-$1,700
Net Cash flow from Operating activities	$115,600

Answer b
Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method.
Staley Inc.
Statement of Cash flows (Partial)
Cash flows from operating activities:
Net Income	$284,400
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$67,900
Loss on disposal of equipment	$23,100
Changes in current operating assets and liabilities:
Increase in accounts receivables	-$25,600
Increase in accounts payable	$11,100
Net Cash flows from Operating activities	$360,900

Answer c
The effects of transactions reported on the statement of cash flows
Transaction	Action	Amount
Gain or loss on sale of land	No effect
Cash received from sale of land	Inflow	$97,000
Cash paid for purchase of land	Outflow	-$210,000

ekkarill92 answered 1 year ago

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