Complete each of the columns on the table below, indicating in which section each item would be reported on the statement of cash flow (Operating, Investing, or Financing), the amount that would be reported, and whether the item would create an increase or decrease in cash. For item that affect more than one section of the statement, indicate all affected. Assume the indirect method of reporting cash flows operating activities.
The first item has been completed as an example.
Definitions:
Ending Inventory
Refers to the total value of goods available for sale at the end of an accounting period, not yet sold.
Lower-of-Cost
A principle requiring that inventory is recorded at the lower cost between its original purchase price and its current market price.
Market Inventory
The total quantity of goods available for sale in the market.
Overstated Inventory
An inventory valuation that is higher than the actual inventory level, which can misrepresent financial health.
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