Question

  A corporation issued $500,000 of common stock in exchange for $500,000 of fixed assets. Where would...

  A corporation issued $500,000 of common stock in exchange for $500,000 of fixed assets. Where would this transaction be reported in the statement of cash flows ?

What are the major advantages of the indirect method of reporting cash flows from operating activities?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Statement of cash flows contains only cash transactions. Here, in this question, since common stock was issued in exchange of fixed assets and no cash was involved, so this transaction will not appear in the statement of cash flows.

Advantages of indirect method of reporting cash flows from operating activities are:

One of the main advantage of using indirect method is that this method provides a reconciliation between net income and net cash flows from operating activities.

This method serves as a linkage between income statement and balance sheet items by showing the changes in current assets and curent liabilities of the balance sheet with related effects on net income in the income statement.

Indirect method also discloses some non cash transactions togetherwith their effect on net income or generating cash flows for example depreciation and loss or gain on disposal of assets.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If common stock was issued to acquire an $8,000 machine, how would the transaction appear on...
If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows? It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities. It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section. It would depend on whether you are using the direct or the indirect method. It would be a negative $8,000...
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect...
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by the major categories on the statement: Entity A's income statement reveals depreciation expense of $10,000. Cash Flows From Operating Activities–Add to Net Income Cash Flows From Operating Activities–Deduct from Net Income Cash Flows From Investing Activities Cash Flows From Financing Activities Non-cash Entity A prepares its Statement of Cash Flows in accordance with...
Which of the following statements is true? Investment in another company's common stock is classified as...
Which of the following statements is true? Investment in another company's common stock is classified as a cash outflow from financing activities in the statement of cash flows. Repayment of long-term debt is classified as a cash outflow from investing activities in the statement of cash flows. Losses on the sale of long-term assets are an adjustment reported in the operating activities section of the statement of cash flows under the indirect method. Dividends paid are classified as a cash...
1. Land costing $78,600 was sold for $92,800 cash. The gain on the sale was reported...
1. Land costing $78,600 was sold for $92,800 cash. The gain on the sale was reported on the income statement as other revenue. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land? a.$171,400 b.$78,600 c.$92,800 d.$14,200 2. A building with a book value of $35,143 is sold for $56,651 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as an increase of...
True or False 1. The approach to preparing the cash flow statement relies on the following...
True or False 1. The approach to preparing the cash flow statement relies on the following rearrangement of the balance sheet equation: Change in cash = Change in (Liabilities + Stockholders' Equity + Noncash Assets). 2. Major investing and financing activities that do not involve cash do not have to be reported as part of the statement of cash flows. 3. In the decline phase, the company continues to enjoy positive operating cash flows but stops spending cash on investing...
14. For each of the following items, indicate with the letter X whether the transaction would...
14. For each of the following items, indicate with the letter X whether the transaction would appear in the operating, investing, or financing activities section of the statement of cash flows, or is not reported in any one of these three categories. Assume the indirect method is used for reporting. (6 pts) Transaction Activity Operating Investing Financing None 1. Revenue minus expenses from operations (i.e., net income) 2. Collection of cash dividend. 3. Payment of a cash dividend previously declared....
Telfer Corp is a publicly listed company reporting under IFRS. For the issue of common shares...
Telfer Corp is a publicly listed company reporting under IFRS. For the issue of common shares in exchange for equipment, indicate where, if at all, the dollar value would be included in the calculations showing the change in cash on the statement of cash flows - Question 18 options: Operating activities section Investing activities section Financing activities section The transaction does not represent a cash flow and needs to be disclosed in the notes to the statement of cash flows.
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect...
Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by major category: Taxes payable increased during the year Cash Flows From Operating Activities–Add to Net Income Cash Flows From Operating Activities–Deduct from Net Income Cash Flows From Investing Activities Cash Flows From Financing Activities Non-cash
1) Which of the following is a method for reporting cash flows from operating activities that...
1) Which of the following is a method for reporting cash flows from operating activities that begins with net income and reconciles to cash flows from operating​ activities? A.accrual method B.direct method C.indirect method D.cashminus−basis method 2) Under the indirect method of preparing a statement of cash​ flows, cash disbursed for the acquisition of a capital asset​ is: A.added in the financing activities section B.added in the investing activities section C.subtracted in the operating activities section D.subtracted in the investing...
4) A corporation issued 6,000 shares of its $2 par value common stock in exchange for...
4) A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include: A) A debit to Common Stock for $12,000. B) A debit to Land for $12,000. C) A credit to Land for $12,000. D) A credit to Additional Paid-in Capital, Common Stock for $72,000. E) A credit to Common Stock for $84,000. 5) Refer to the fact pattern in...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT