Howard Company Uses the Direct Method to Prepare Its Operating

question 32

Essay

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows.
Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.
On September 10, Year 1, Howard Company received a check for $250 for dividends on Troxell Corporation stock that Howard holds as an investment. Show the effects of this transaction on Howard's income statement and statement of cash flows.

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Definitions:

Negotiable Instruments

Financial documents that promise to pay the bearer or named party a specific sum of money, either on demand or at a set time.

Investment Securities

Financial instruments such as stocks, bonds, and mutual funds that are purchased with the expectation of earning a return.

Sales Of Goods

Transactions or agreements involving the exchange of tangible, movable items between parties for money or other consideration.

Temporary Insurance

A limited-term coverage that provides immediate protection until a permanent insurance policy is issued or denied.