A Company Uses the Indirect Method to Prepare the Statement

question 31

Essay

A company uses the indirect method to prepare the statement of cash flows. The board of directors
declared dividends on common stock of $165,000 during the year. Dividends payable were $48,000 at the
beginning of the year and $44,000 at the end of the year.
A. What was the amount of cash paid for dividends during the year?
B. Where will this amount appear on the statement of cash flows?
C. How would the amount appear if the company uses the direct method to prepare the statement?

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Definitions:

Acquired Firm

A company that has been purchased and absorbed by another entity.

Going-Private Transaction

A process in which a publicly traded company is transformed into a privately held entity, often through a buyout from private investors.

Bidding Firm

A company that proposes a financial offer in an attempt to acquire another company or win a contract.

Board of Directors

A group of individuals elected by the shareholders of a corporation to oversee the management and make major decisions affecting the company's policies and strategies.