Avatar Company Uses the Indirect Method to Prepare Its Statement

question 151

True/False

Avatar Company uses the indirect method to prepare its statement of cash flows. The treasury stock account had a debit balance of $5,000 at the beginning of the year, and a debit balance of $8,000 at the end of the year. No treasury stock was sold during the year.
The financing section of the statement of cash flows will show a negative cash flow of $3,000 for purchases of treasury stock.

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Definitions:

Dividends

Payments made by a corporation to its shareholder members, typically from profits or reserves.

Retained Earnings

The portion of net income left over after dividends are paid to shareholders, reinvested in the business or used to pay off debt.

Corporate Form

A legal structure for a business recognized as a separate legal entity from its owners, providing limited liability.

Partnership Form

A legal form of business operation between two or more individuals who share management and profits.