New York Production Company uses the indirect method to prepare its statement of cash flows. The Treasury Stock account had a debit balance of $11,000 at the beginning of the year and a debit balance of $16,000 at the end of the year. No treasury stock was sold during the year. The financing section of the statement of cash flows will show a positive cash flow of $5,000 for the buyback of treasury stock.

Question

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The Treasury Stock account had a debit balance of $11,000 at the beginning of the year and a debit balance of $16,000 at the end of the year, indicating an increase in the amount of treasury stock. The indirect method for preparing the statement of cash flows requires adjustments for changes in current asset and liability accounts. The purchase of treasury stock is a financing activity, but the change in the treasury stock account does not directly impact cash flows. Therefore, there would be no adjustment in the financing section of the statement of cash flows for the change in the Treasury Stock account.

New York Production Company Uses the Indirect Method to Prepare