1. Computing Cash Flows from Operating Activities: Indirect Method
During 2014, Ortega Corporation had net income of $82,000. Included on its income statement were depreciation expense of $4,600 and amortization expense of $600. During the year, Accounts Receivable increased by $6,800, Inventories decreased by $3,800, Prepaid Expenses decreased by $400, Accounts Payable increased by $10,000, and Accrued Liabilities decreased by $900. Determine net cash flows from operating activities using the indirect method.
2. Preparing a Schedule of Cash Flows from Operating Activities: Indirect Method
For the year ended June 30, 2014, net income for Flake Corporation was $14,800. Depreciation expense was $4,000. During the year, Accounts Receivable increased by $8,800, Inventories increased by $14,000, Prepaid Rent decreased by $2,800, Accounts Payable increased by $28,000, Salaries Payable increased by $2,000, and Income Taxes Payable decreased by $1,200. Use the indirect method to prepare a schedule of cash flows from operating activities.
3. Computing Cash Flows from Investing Activities: Plant Assets
The T accounts for plant assets and accumulated depreciation for Street Company at the end of 2014 follow.
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Plant Assets
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Accumulated Depreciation
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Dr.
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Cr.
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Dr.
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Cr.
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Beg. Bal.
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130,000
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Disposals
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46,000
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Disposals
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29,400
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Beg. Bal.
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69,000
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Purchases
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67,200
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Depreciation
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20,400
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End. Bal.
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151,200
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End. Bal.
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60,000
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In addition, Street's income statement shows a gain on sale of plant assets of $8,800. Compute the amounts to be shown as cash flows from investing activities, and show how they appear on the statement of cash flows.
4. Classification of Cash Flow Transactions
Analyze each transaction listed in the table that follows and place X's in the appropriate columns to indicate the transaction's classification and its effect on cash flows using the indirect metluxf.
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Cash Flow Classification
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Effect on Cash Flows
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Transaction
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Operating Activity
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Investing Activity
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Financing Activity
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Noncash Activity
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Increase
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Decrease
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No Effect
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1. Increased accounts payable.
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2. Decreased inventory.
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3. Increased prepaid insurance.
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4. Earned a net income.
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5. Declared and paid a cash dividend.
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6. Issued stock for cash.
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7. Retired law-term debt by issuing stock
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8. Purchased a long term investment with cash.
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9. Sold trading securities at a gain.
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10. Sold a machine at a loss.
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11. Retired fully depreciated equipment.
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12. Decreased interest payable.
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13. Purchased available-for-sale securities (long-term).
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14. Decreased dividends receivable.
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15. Decreased accounts receivable.
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16. Converted bonds to common stock.
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17. Purchased 90-day Treasury bill
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