Carpino Company
Not what you're looking for?
I need help understanding and preparing a statement of cash flows using the indirect method from a statement of cash flows. Please see the attached file.
Ron Nord and Lisa Smith are examining the following statement of cash flows for Carpino Company for the year ended January 31, 2007.
CARPINO COMPANY
Statement of Cash Flows
For the Year Ended January 31, 2007
Sources of cash
From sales of merchandise $380,000
From sale of capital stock 420,000
From sale of investment (purchased below) 80,000
From depreciation 55,000
From issuance of note for truck 20,000
From interest on investments 6,000
Total sources of cash 961,000
Uses of cash
For purchase of fixtures and equipment 330,000
For merchandise purchased for resale 258,000
For operating expenses (including depreciation) 160,000
For purchase of investment 75,000
For purchase of truck by issuance of note 20,000
For purchase of treasury stock 10,000
For interest on note payable 3,000
Total uses of cash 856,000
Net increase in cash $105,000
Ron claims that Carpino's statement of cash flows is an excellent portrayal of a superb first year with cash increasing $105,000. Lisa replies that it was not a superb first year.
Rather, she says, the year was an operating failure, that the statement is presented incorrectly, and that $105,000 is not the actual increase in cash. The cash balance at the beginning of the year was $140,000.
Instructions
(a) Using the data provided, prepare a statement of cash flows in proper form using the indirect method. The only noncash items in the income statement are depreciation and the gain from the sale of the investment.
(b) With whom do you agree, Ron or Lisa? Explain your position.
Purchase this Solution
Solution Summary
This solution is comprised of a detailed explanation to prepare a statement of cash flows in proper form using the indirect method.
Solution Preview
Ron Nord and Lisa Smith are examining the following statement of cash flows for Carpino Company for the year ended January 31, 2007.
CARPINO COMPANY
Statement of Cash Flows
For the Year Ended January 31, 2007
Sources of cash
From sales of merchandise $380,000
From sale of capital stock 420,000
From sale of investment (purchased below) 80,000
From depreciation 55,000
From issuance of note for truck 20,000
From interest on investments 6,000
Total sources of cash 961,000
Uses of cash
For purchase of fixtures and equipment 330,000
For merchandise purchased for resale 258,000
For operating expenses (including depreciation) 160,000
For purchase of investment 75,000
For purchase of truck by issuance of note ...
Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)