STATEMENT OF CASH FLOWS: REPORTING THE EFFECTS OF OPERATING, INVESTING, AND FINANCING ACTIVITIES ON CASH FLOWS T4-X
4.23(Effect of various transactions on statement of cash flows.)
a.(1)Decreases by $600; reduces net income through amortization expense.
(2)Increases by $600; amount of expense is added back to net income in deriving cash flow from operations.
No effect on net cash flow from operations.
b.The transaction does not appear in the statement of cash flows because it does not affect cash. The firm must disclose information about the transaction in a supplemental schedule or note.
c.(2)Increases by $7,500; operating increase in cash from increase in Accounts Payable.
(3)Increases by $7,500; operating decrease in cash for increase in inventory.
The net effect of these two transactions is to leave cash from operations unchanged, because the amounts added and subtracted change in such a way as to cancel out each other.
d.(1)Decreases by $1,500; net income goes down.
(2)Increases by $1,500; additions go up because inventory, not cash, was destroyed.
e.(2)Increases by $1,450; operating increase in cash reflected by decrease in the amount of Accounts Receivable.
(9)Increases by $1,450.
f.(6)Increases by $10,000; increase in cash from security issue.
(9)Increases by $10,000.