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Q19E

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 776

Short Answer

Computing operating activities cash flow—indirect method

The records of Vintage Color Engraving reveal the following:

Net income $ 36,000

Depreciation expense $ 5,000

Sales revenue 53,000

Decrease in current liabilities 19,000

Loss on sale of land 4,000

Increase in current assets other than cash 10,000

Acquisition of land 35,000

Compute cash flows from operating activities by the indirect method for year ended December 31, 2018.

Net cash provided by operating activities is $16,000.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Cash flow from operating activities- Indirect method

Indirect method starts with net income and adjustments are made to reconcile net income to net cash provided by operating activities.

Step 2: Cash flow from operating activities

Cash flows from operating activities

Amount

Amount

Net Income

$36,000

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation expense

$5,000

Increase in current assets other than cash

($10,000)

Decrease in current liabilities

($19,000)

Loss on sale of land

$4,000

Net cash provided by operating activities

$16,000

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