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Statements of Cash Flow

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1. Determining cash flows from investing activities:
On January 1, 2008, Duncan Company had a balance of $59,600 in its Delivery Equipment account. During 2008, Duncan purchased delivery equipment that cost $18,500. The balance in the Delivery Equipment account on December 31, 2008, was $60,000. The 2008 income statement contained a gain from the sale of equipment for $3,000. On the date of sale, accumulated depreciation on the equipment sold amounted to $10,000.

Required:

a. Determine the cost of the equipment that was sold during 2008
b. Determine the amount of cash flow from the sale of delivery equipment that should be shown in the investment activities section of the 2008 statement of cash flows.

2. Determining cash flows from financing activities:
On January 1, 2008, parker Company had a balance of $120,000 in its Common Stock account. During 2008, Parker paid $18,000 to purchase treasury stock. Treasury stock is accounted for using the cost method. The balance in the Common Stock account on December 31, 2008, was $130,000. Assume that the common stock is no par stock.

Required

a. Determine the cash inflow from the issue of common stock.
b. Prepare the financing activities section of the 2008 statement of cash flows.

3. Direct versus indirect method of determining cash flows from operating activities:
Security Services, Inc. (SSI), recognized $2,400 of sales revenue on account and collected $1,900 of cash from accounts receivable. Further, SSI recognized $900 of operating expenses on account and paid $400 cash as initial settlement of accounts payable.

Required
Based on the information alone:

a. Prepare the operating activities section of the statement of cash flows under the direct method.
b. Prepare the operating activities section of the statement of cash flows under the indirect method.

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The solution explains some calculations relating to statement of cash flows.

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