Katie Ltd's Policy Is to Report All Cash Flows Arising from from Interest

question 34

Essay

Katie Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Katie's activities for the year ended December 31, 2021 included the following:
• Income tax expense for the year was $30,000.
• Sales for the year were $1,030,000.
• Accounts payable decreased $20,000 in 2021.
• Selling and administration expenses for the year totaled $240,000.
• Accounts receivable decreased $36,000 in 2021.
• Mamie's cost of goods sold in 2021 was $315,000.
• Mamie's inventory increased $13,000 during the year.
• Interest expense for the period was $12,000. The interest payable account increased $5,000.
• Dividends were not declared during the year; however, the dividends payable account increased $5,000.
• Sold an investment at FVOCI for $45,000. The original cost was $52,000.
• Depreciation expense for the year was $19,000.
Required:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b. Identify how the activities listed above that are not operating activities would be reported in the statement of cash flows.

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