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Direct and Indirect Cash Flow Statements

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A) Prepare a statement of cash flow using the indirect method, including all required disclosures.
b) Prepare a "cash provided by (or used in) operating activities" section under the direct method.
c) Comment on the company's cash flow activities during the year.

See the attached EXCEL file for all of the figures and appropriate information.

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Direct Method - Statement of Cash Flows

Cash flow from Operating activities
Income before taxes $112,000
Bad debt expense $2,000
Loss on sale of equipment $3,000
Gain on sale of investments (AFS) $(15,000)
Deprecaition and amortization $20,000 $10,000
Cash flow before working capital changes $122,000
Working capital changes:
Increase in accounts receivable $(17,500)
Increase in merchandise inventory $(14,000)
Reduction in accrued pension liability $(2,500)
Increase in accounts payable $12,500 $(21,500)
Income taxes paid $(38,500)
Cash flow from Operating activities $62,000

Cash flow from Investing activities
Sale of investments $52,000
Proceeds from sale of equipment $3,000
Purchase of equipment $(32,000)
Cash flow from Investing activities $23,000

Cash flow from Financing activities
Issue of shares $35,000
Repayment of long term notes $(8,000)
Dividends paid $(74,000)
Change in other comprehensive income $(9,000)
Cash flow from ...

Solution Summary

The direct and indirect cash flow statements are examined.

See Also This Related BrainMass Solution

Fairchild Company: Statement of cash flows, both direct and indirect

Prepare a statement of cash flows using the direct & the indirect method for Fairchild Company.

Financial data for Fairchild Co for 2009 & 2010 are attached.

Condensed financial data of Fairchild Company for 2010 and 2009 are presented below.

Comparative Balance Sheet
as of December 31 2010 and 2009
2010 2009
Cash $1,800 $1,100
Receivables 1,750 1,300
Inventory 1,600 1,900
Plant assets 1,900 1,700
Accumulated depreciation (1,200) (1,170)
Long-term investments (Held-to-maturity) 1,300 1,470
$7,150 $6,300

Accounts payable $1,200 $ 800
Accrued liabilities 200 250
Bonds payable 1,400 1,650
Capital stock 1,900 1,700
Retained earnings 2,450 1,900
$7,150 $6,300

Income Statement
For the year ended December 31, 2010
Sales $6,900
Cost of goods sold 4,700
Gross margin 2,200
Selling and administrative expense 930
Income from operations 1,270
Other revenues and gains
Gain on sales of investments 80
Income before tax 1,350
Income tax expense 540
Net income $810
Additional information:
During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2010. Cash dividends were $260.
Instructions: a) Complete the statement of cash flows using the indirect method.
b) complete the statement of cash flows using the direct method

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