Howard Company Uses the Direct Method to Prepare Its Operating

question 151

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.
Howard Company made a $25,000 cash payment on a term loan. The payment included a $23,000 reduction of principal as well as $2,000 of interest. (Show the combined effects of the events.)

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Definitions:

Alphabetical Order

The sequence of arrangement based on the first letter of each item according to the English alphabet; akin to alphabetical listing but focuses on the process.

Limitation

A restriction or boundary that defines the scope or extent of something, often highlighting a weakness or drawback.

Reservation

The act of holding or booking a place, item, or service for future use, or a doubt or objection raised regarding a particular point or proposal.

Delimitation

The process of establishing boundaries or limits, often used in research to define the scope of a study.