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Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372 Exercise 30
Understanding the Computation of Cash flows from Operating Activities (Indirect Method)
Suppose your company sells services for $325 cash this month. Your company also pays $100 in wages, which includes $15 that was payable at the end of the previous month and $85 for wages of this month.
Required:
1. Show the journal entries to record these transactions.
2. Calculate the amount that should be reported as net cash flow from operating activities.
3. Calculate the amount that should be reported as net income.
4. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2).
5. What general rule about converting net income to operating cash flows is revealed by your answer to requirement 4
Suppose your company sells services for $325 cash this month. Your company also pays $100 in wages, which includes $15 that was payable at the end of the previous month and $85 for wages of this month.
Required:
1. Show the journal entries to record these transactions.
2. Calculate the amount that should be reported as net cash flow from operating activities.
3. Calculate the amount that should be reported as net income.
4. Show how the indirect method would convert net income (requirement 3) to net cash flow from operating activities (requirement 2).
5. What general rule about converting net income to operating cash flows is revealed by your answer to requirement 4
Explanation
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1.
The journal entries to record the tra...
Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
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