Exam 12: Reporting and Analyzing Cash Flows

Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method. RASHID CORPORATION Income Statement For Year Ended December 31, 2013 Sales \ 504,000 Cost of goods sold \ 327,600 Depreciation expense 42,000 Other operating expenses 125,500 (495,100) Other gains (losses): Gain on sale of equipment Income before taxes \ 16,100 Income tax expense (4,800) Net income \ 11,300 RASHID CORPORATION Balance Sheets At December 31 2013 2012 Assets Cash \ 64,650 \ 55,800 Accounts receivable 21,000 29,000 Inventory 58,000 52,100 Equipment 240,000 222,000 Accumulated depreciation (106,000) (96,000) Total assets \ 277,650 \ 262,900 Liabilities: Accounts payable \ 28,400 \ 23,700 Income taxes payable Total liabilities \ 29,450 \ 24,900 Equity Common stock \ 106,000 \ 106,000 Contributed Capital in excess of par value 18,000 18,000 Retained earnings Total equity \ 248,200 \ 238,000 Total liabilities and equity \ 277,650 \ 262,900

The statement of cash flows explains how transactions and events impact the end-of-period cash balance to produce the end-of-period net income balance.

Use the following information to calculate cash paid for salaries: Salaries expense \ 79,000 Salaries payable, January 1 6,400 Salaries payable, December 31 3,320

The indirect method for the preparation of the operating activities section of the statement of cash flows:

Explain the what value separating cash flows into operating activities, investing activities, and financing activities has to financial statement users when it comes analyzing cash flows and the company's financial condition.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Both cash dividends received and interest received are considered to be investing inflows.

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from financing activities generally affect:

Which one of the following is representative of typical cash flows from operating activities?

Define and discuss the differences between operating, investing, and financing activities.