Effects of Transactions on the Statement of Cash Flows (Indirect

question 24

Essay

Effects of transactions on the statement of cash flows (indirect method)
Any given transaction may affect a statement of cash flows (using the indirect method) in one or more of the following ways:
Cash flows from operating activities
A. Net income will be increased or adjusted upward.
B. Net income will be decreased or adjusted downward.
Cash flows from investing activities
C. Increase as a result of cash inflows.
D. Decrease as a result of cash outflows.
Cash flows from financing activities
E. Increase as a result of cash inflows.
F. Decrease as a result of cash outflows.
The statement of cash flows is not affected
G. Not required to be reported on the statement.
Instructions
For each transaction listed below, list the letter or letters from above that describe(s) the effect of the transaction on a statement of cash flows (indirect method) assuming the company follows ASPE. Ignore any income tax effects.
1. Redeemed preferred shares with a carrying value of $ 44,000 for $ 50,000.
2. Wrote off uncollectible accounts receivable of $ 3,000 against the allowance for doubtful accounts balance of $ 12,200.
3. Sold machinery that originally cost $ 3,000, with a book value of $ 1,800, for $ 5,000.
4. Acquired land through the issuance of bonds payable.
5. Sold 1,000 common shares for $ 25 per share.
6. Sold treasury shares at their carrying value.
7. Paid cash dividends of $ 8,000.
8. Purchased a patent for $ 20,000.
____ 9. Recorded depreciation expense of $ 150,000 for the year.

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Definitions:

Adulthood

The life stage following adolescence, characterized by full physical development and legal recognition of majority.

Divorce

The legal dissolution of a marriage by a court or other competent body.

Dying

The process of approaching death, including the cessation of biological functions that sustain life.

Death

is the cessation of all biological functions that sustain a living organism.