A company has a net cash inflow from operating activities of $789,000,a net cash outflow of $50,000 from investing activities and a net cash inflow of $100,000 from financing activities.The company paid $124,000 in interest,$186,500 in income taxes,and $200,000 in cash dividends.Which of the following statements about the statement of cash flows is not correct?
A)The cash dividends of $200,000 paid will be reported as a cash outflow in the cash flow from investing activities section.
B)Supplemental disclosures required for a company using the indirect method include the amount of interest and the amount of income taxes paid.
C)The statement of cash flows will show a net increase in cash and cash equivalents of $839,000.
D)If the direct method is used,the $124,000 of interest paid and the $186,500 of income taxes paid will be reported in the cash flows from operating activities.

Question

Quizplus · Accepted Answer

The payment of cash dividends is reported as cash outflows in the financing (rather than investing)activities section.
Note that the net increase in cash and cash equivalents is calculated as follows:
Net increase in cash and cash equivalents = Net cash inflow from operating activities − Net cash outflow from investing activities + Net cash inflow from financing activities
= $789,000 + ($50,000)+ $100,000 = $839,000

A Company Has a Net Cash Inflow from Operating Activities