Question

Chapter 12- Direct Method The following financial statements and additional information are reported. Using the direct method, prepare the statement of cash flows for the year ended June 30, 2019 224, Soo IKIBAN INC. Comparative Balance Sheets June 30, 2019 and 2018 2019 2018 Assets Cash $ 74,900 $ 65,000 Accounts receivable, net 96,500 72,000 Inventory 84,800 118,000 Prepaid expenses 6,500 9,600 Total current assets 262,700 264,600 Equipment 145,000 136.000 Accum. depreciation Equipment (37,500 (19,500) Total assets $370,200 $381,100 Liabilities and Equity Accounts payable 15,500 - $ 46,000 - $ 61,500 Wages payable 8,100 19,200 Income taxes payable 5,500 8,000 Total current liabilities 59,600 88,700 Notes payable (long term) 34,200 81,000 Total liabilities 93,800 169,700 Equity Common stock, $5 par value 262.000 181 000 - Retained earnings 14,400 30,400 Total liabilities and equity $370,200 $381,100 IKIBAN INC. Income Statement For Year Ended June 30, 2019 Sales $783,000 Cost of goods sold 432,000 Gross profit 351,000 Operating expenses Depreciation expense $79,600 - Other expenses 88,000 Total operating expenses 167,600 183,400 Other gains (losses) Gain on sale of equipment 4.100 Income before taxes 187,500 Income taxes expense 45,990 Net income $141,510 21.00

Using DIRECT METHOD, calculate Net Cash from Financing Activities.

(I know how to calculate net cash from operating activities using the direct method, but I'm not sure how to do it with financing activities - direct method-)

Answer 1

There is no difference between direct method and indirect method in reporting "Cash flow from Financing Activities" on statement of cash flows because there exists difference in reporting "Cash flow from Operating Activities" block only. Cash flow from financing activities: Cash received from issuing common stock Cash used to retire long-term note payable Cash dividends paid Net cash flow from financing activities $81,000 [$262,000 - $181,000] -$46,800 [$34,200 - $81,000] -$157,510 [$30,400 + $141,510 - $14,400] -$123,310 Explanation: Statement of cash flows is prepared for a reporting period for analyzing reasons for change in cash balance between two reporting periods. It is broadly categorised into operating activities, investing activities and financing activities. Cash flow from financing activities contain data related to cash received from issuing fresh common stock or preferred stock or debt instruments, etc. and cash paid to discharge debt instruments or paid to purchase firm's treasury stock or paid to pay cash dividends.