1. A company uses the indirect method to determine its cash flows from operating

Question

1. A company uses the indirect method to determine its cash flows from operating activities. Use the following information to determine its net cash provided or used by operating activities:

Net income

$15,200

Depreciation expense

$10,000

Cash payment on note payable

$8,000

Gain on sale of land

$3,000

Increase in inventory

$1,500

Increase in accounts payable

$2,850

2.A business settles a note payable that is long term plus interest by paying $68,000 cash toward the principal amount and $5,440 cash for interest. Compute the amount reported as a use of cash under cash flows from financing activities. Explain your answer.

1.Based on the following information, determine the company’s cash amount for annual salaries and wages paid:

Salaries and wages expense

$255,000

Salaries and wages payable, prior year end

$8,200

Salaries and wages payable, current year end

$10,900

4.Based on the following information, determine the amount of cash paid for current year’s inventory:

Cost of goods sold

$545,000

Inventory, prior year end

$105,000

Inventory, current year end

$112,000

Accounts payable, prior year end

$98,500

Accounts payable, current year end

$101,300

1.Classify the following cash flows as either operating, investing, or financing activities:

i.Sold long-term investments for cash

ii.Received cash payments from customers

iii.Received cash from sale of land at a loss

iv.Paid cash for wages and salaries

v.Purchased inventories for cash

vi.Paid cash dividends

vii.Issued common stock for cash

viii.Received cash interest on a note

ix.Paid cash interest on outstanding notes

x.Paid cash for property taxes on building

Net income

$15,200

Depreciation expense

$10,000

Cash payment on note payable

$8,000

Gain on sale of land

$3,000

Increase in inventory

$1,500

Increase in accounts payable

$2,850

Explanation / Answer

1 Cash Flow from Operating Activities Net Income 15200 Add: Depreciation 10000 Less: Gain on sale of land -3000 Increase in Inventory -1500 Increase in Accounts Payable 2850 Cash Flow from Operating Activities 23550 2 Cash Flow from Financing activities will eb the amount of which notes payables has been paid off ($68,000) -5440 Will be cash flow from operating activities 3 Cash Amount Paid Prior year Salaries & Wages Payable 8200 Salaries & Wages Expense 255000 Less: Current year end payable -10900 Cash Amount Paid 252300 For current period 252300-8200 244100

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