Statement of cash flows in proper form using indirect method

Assignment Help Financial Accounting

Reference no: EM13712257

Ron Nord and Lisa Smith are examining the following statement of cash flowsfor Carpino Company for the year ended January 31, 2007.

CARPINO COMPANY Statement of Cash Flows For the Year Ended January 31, 2007
Sources of cash
From sales of merchandise	$380,000
From sale of capital stock	420,000
From sale of investment (purchased below)	80,000
From depreciation	55,000
From issuance of note for truck	20,000
From interest on investments	6,000
Total sources of cash	961,000
Uses of cash
For purchase of fixtures and equipment	330,000
For merchandise purchased for resale	258,000
For operating expense (including depreciation)	160,000
For purchase of investment	75,000
For purchase of truck by issuance of note	20,000
For purchase of treasury stock	10,000
For interest on note payable	3,000
Total uses of cash	856,000
Net increase in cash	$105,000

Ron claims that Carpino's statement of cash flows is an excellent portrayal of a superbfirst year with cash increasing $105,000. Lisa replies that it was not a superb first year.Rather, she says, the year was an operating failure, that the statement is presented incorrectly,and that $105,000 is not the actual increase in cash. The cash balance at thebeginning of the year was $140,000.

Instructions

With the class divided into groups, answer the following.

(a) Using the data provided, prepare a statement of cash flows in proper form using the indirect method. The only noncash items in the income statement are depreciation and the gain from the sale of the investment.

(b) With whom do you agree, Ron or Lisa? Explain your position.

Reference no: EM13712257

Questions Cloud

Explain each of the ethical decision-making approaches : Briefly explain each of the ethical decision-making approaches and discuss how the two approaches are similar.

L;eft atrium is damaged and is generating a great resistance : The left atrium is damaged and is generating a great resistance to blood coming from pulmonary vein. What happens due to this pressure? A: back up of blood causing a subsequent back flow of blood into the inferior vena cava

Habitat restoration plan and conduct an analysis : Habitat Restoration Plan and conduct an analysis of its proposed actions, feasibility, and contribution to conservation biology for the species and region represented in the plan.This project should be no less than 10 pages (not counting title ..

What is the profit-maximizing unit price : Evaluate the statistical significance of the three estimated parameters using a significance level of 5 percent and what is the profit-maximizing unit price PoolVac

Statement of cash flows in proper form using indirect method : Prepare a statement of cash flows in proper form using theindirect method. The only noncash items in the income statement are depreciation and the gain from the sale of the investment.

Maximum carbon content possible for a plain carbon steel : What is the maximum carbon content possible for a plain carbon steel that must have an impact energy of at least 200 J at -50degC?

Calculate the heat transmission through the wall : An outside wall of a building is constructed of 1/2 inch gypsum sheeting, 8 inches of concrete block (hollow, 3 oval core), and 4 inches of common brick. The inside of the building is maintained at 75F dry-bulb temperature and 65F wet-bulb temperatur..

Grania companys income statement : Prepare the operating activities section of the statement of cash flows using the direct method - Grania Companys income statement contained the condensed information.

Strain gauge is used to measure the top surface strain : A strain gauge is used to measure the top surface strain on an end loaded cantilevered beam. From the end of the beam to the location of the strain gauge is L=12.1 inches. The width of the beam is w=0.99 inches, and the the thickness of the beam is t..

User Account

All Pages