NOTES TO THE INSTRUCTOR

question 73

Essay

NOTES TO THE INSTRUCTOR:
* The problem requirement does not indicate whether the indirect or direct method must be used to determine the net cash provided by operating activities. You can, if you choose, specify that either (or even both) methods be used. The solution contains solutions for both methods.
* Due to the length of the problem, you may want to eliminate one or more of the requirements.
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Davis Company's comparative balance sheet and income statement for last year appear below:

The company declared and paid $26,000 in cash dividends during the year.
Required:
a. Construct the operating activities section of the company's statement of cash flows for the year.
b. Construct the investing activities section of the company's statement of cash flows for the year.
c. Construct the financing activities section of the company's statement of cash flows for the year.

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Definitions:

Input

Resources such as labor, materials, and capital used in the production of goods and services.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.

Output

The total quantity of goods or services produced by a firm or economy over a specific period.

Marginal Product

Refers to the additional output that is produced by adding one more unit of a specific input, assuming all other inputs are held constant.