Select Transactions of Irene Accounting Inc

question 1

Essay

Select transactions of Irene Accounting Inc. (IAI)are listed below. IAI uses the indirect method to determine cash flows from operating activities.
1. IAI sells an investment at amortized cost for $28,000. The investment's book value is $20,000.
2. IAI's income tax expense totaled $30,000. Its income tax payable account increased $5,000, while its deferred income tax liability account decreased $18,000.
3. IAI declares a cash dividend of $3,000. The dividends payable account increases $1,000.
4. At year-end IAI increases its allowance for bad debts by $15,000.
Required:
Discuss how the activities listed above would be reported in the statement of cash flows. For items with multiple reporting options, identify all available options. For items not reported on the statement of cash flows, indicate the disclosure requirements, if any.

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Definitions:

Amortization

The gradual reduction or the expensing of an intangible asset's cost over its useful life, similar to depreciation for tangible assets.

Fair Market Value

The price at which an asset would sell in the marketplace between a willing buyer and a willing seller, each having reasonable knowledge of the pertinent facts.

Trade-In Allowance

The amount credited to the buyer of a new item for the value of the old item that is being traded in as part of the transaction.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired.