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Cash Flow Statement - Indirect

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A company sold some of its plant assets during 2007. The original cost of the plant assets was $750,000 and the accumulated depreciation at date of sale was $700,000. The proceeds from the sale of the plant assets were $105,000. The information concerning the sale of the plant assets should be shown on the company's statement of cash flows (indirect method) for the year ended December 31, 2008, as a(n):

a.subtraction from net income of $55,000 and a $55,000 increase in cash flows from financing activities.

b.addition to net income of $55,000 and a $105,000 decrease in cash flows from investing activities.

c.subtraction from net income of $55,000 and a $105,000 increase in cash flows from investing activities.

d.addition of $105,000 to net income.

e.none of the above

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A company sold some of its plant assets during 2007. The original cost of the plant assets was $750,000 and the accumulated depreciation at date of sale was $700,000. The proceeds from the sale of the plant assets were $105,000. The information concerning the sale of the plant assets should be shown on the company's statement of cash flows (indirect method) for the year ended December 31, 2008, as a(n):

Step 1
Find out the gain or loss on the sale of Asset by Sale -Book Value
=105000-(750000-700000)
=Gain of $55000

Step 2
Posting the necessary ...

Solution Summary

The solution computes the indirect cash flow statements. Additional net income that decreases in cash flow from investing activities are determined.

$2.19
See Also This Related BrainMass Solution

Intermediate Financial Accounting Problem - Cash Flow Statement using indirect method.

The comparative balance sheets for Talbot Corporation show the following information:
December 31
2008 2007
Cash $1,800 $1,050
Accounts receivable 1,750 1,400
Inventory 1,600 1,800
Plant Assets 1,900 1,700
Accumulated depreciation (1,200) (1,150)
Long-term investments (Held-to-maturity) 1,300 1,320
Totals $7,150 $6,120

Accounts payable $1,200 $800
Accrued liabilities 200 270
Bonds payable 1,400 1,550
Common stock 1,900 1,700
Retained earnings 2,450 1,800
Totals $7,150 $6,120

Talbot Corporation
Income Statement
For the Year Ended December 31, 2008

Sales $6,900
Cost of goods sold 4,600
Gross margin 2,300
Selling and administrative expense 930
Income from operations 1,370
Other revenues and gains
Gain on sale of investments 80
Income before tax 1,450
Income tax expense 540
Net income 910
Cash dividends 260
Income retained in business $650

Additional information:
During the year, $70 of common stock was issued in exchange for plant assets. No plant
assets were sold in 2008.

Instructions:
Prepare a statement of cash flows using the indirect method.

TALBOT CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2008
Cash flows from operating activities
Net income Amount
Adjustments to reconcile net income to net cash provided by operating activities:

Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount Formula
Net cash provided by operating activities Formula

Cash flows from investing activities
Text Title Amount
Text Title Amount
Net cash provided by investing activities Formula

Cash flows from financing activities
Text Title Amount
Text Title Amount
Text Title Amount
Net cash used by financing activities Formula

Increase in cash Amount
Cash, January 1, 2008 Amount
Cash, December 31, 2008 Formula

Noncash investing and financing activities
Text Title Amount

Instructions:
Prepare a statement of cash flows using the direct method.
(Do not prepare a reconciliation schedule).

TALBOT CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2008
Cash flows from operating activities
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount Formula
Net cash provided by operating activities Formula

Cash flows from investing activities
Text Title Amount
Text Title Amount
Net cash provided by investing activities Formula

Cash flows from financing activities
Text Title Amount
Text Title Amount
Text Title Amount
Net cash used by financing activities Formula

Increase in cash Amount
Cash, January 1, 2008 Amount
Cash, December 31, 2008 Formula

Noncash investing and financing activities
Text Title Amount

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