Reuse It Inc

question 28

Essay

Reuse It Inc.'s (RII)policy is to report all cash flows arising from interest and dividends in the operating section.The company's activities for the year ended December 31,2016 included the following:
• Comprehensive income totaled $468,000 including $88,000 in other comprehensive income.
• Paid a cash dividend of $30,000 that was declared in 2015.
• Interest expense for the year was $14,000; the opening and closing balances in the interest payable account were $28,000 and $19,000,respectively.
• Accounts receivable increased $63,000 and accounts payable decreased $19,000 during the year.
• RII paid $51,000 cash for equipment.
• RII sold held-to-maturity investments for $36,000.The book value of the investment was $39,000.
• Depreciation expense for the year totaled $9,000.
• Suffered an impairment loss on patents of $1 0,000.
• Declared and issued a 2-for-l stock split.There were 20,000 ordinary shares outstanding before the split with a collective market value of $3,000,000.
Requirements:
a.Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
b.Identify how the activities detailed above that are not operating activities would be reported in the statement of cash flows.

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Definitions:

Inventory Turnover Ratio

The inventory turnover ratio measures how many times a company's inventory is sold and replaced over a period.

Average Days

An accounting measure used to calculate the average number of days taken for a company to collect cash from its customers or pay its debts.

Dividend Yield Ratio

An economic ratio that illustrates the yearly dividend disbursement of a company as a percentage of its stock value.

Net Profit Margin

A financial ratio that shows the percentage of profit a company makes for each dollar of sales, after all expenses are deducted.