Tub Time Corp.'s policy is to report all cash flows arising from interest and dividends in the operating activities section. Tub Time's activities for the year ended December 31,2018 included the following:
• 2018's net income after taxes totaled $220,000.
• Declared and issued a stock dividend valued at $40,000.
• Accounts receivable decreased $44,000 in 2018.
• Sold a held-for-trading investment for $13,000. The book value was $11,000. (Assume this held-for-trading investment was not designated as a cash equivalent.)
• Interest revenue for the period was $6,000. The interest receivable account decreased $4,000.
• Declared a $10,000 dividend payable. The dividends payable account decreased $19,000 in 2018.
• Sold an available-for-sale investment for $9,000. The book value was $14,000.
• Tub Time recorded a $15,000 goodwill impairment loss during the year.
• Depreciation expense for the year was $14,000.
Requirements:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
b. Identify how the activities listed above that are not operating activities would be required in the statement of cash flows.

Question

Quizplus · Accepted Answer

The Answer of Tub Time Corp.'s policy is to report all cash flows arising from interest and dividends in the operating activities section. Tub Time's activities for the year ended December 31,2018 included the following:
• 2018's net income after taxes totaled $220,000.
• Declared and issued a stock dividend valued at $40,000.
• Accounts receivable decreased $44,000 in 2018.
• Sold a held-for-trading investment for $13,000. The book value was $11,000. (Assume this held-for-trading investment was not designated as a cash equivalent.)
• Interest revenue for the period was $6,000. The interest receivable account decreased $4,000.
• Declared a $10,000 dividend payable. The dividends payable account decreased $19,000 in 2018.
• Sold an available-for-sale investment for $9,000. The book value was $14,000.
• Tub Time recorded a $15,000 goodwill impairment loss during the year.
• Depreciation expense for the year was $14,000.
Requirements:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
b. Identify how the activities listed above that are not operating activities would be required in the statement of cash flows.