O'Reilly logo

Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

SOLUTION TO EXERCISE 13-7

images

TIP: When preparing a statement of cash flows, companies may need to make numerous adjustments of net income. A worksheet is often used to assemble and classify the data that will appear on the statement. The steps in preparing the worksheet are: (1) Enter in the balance sheet accounts section the balance sheet accounts and their beginning and ending balances. (2) Enter in the reconciling columns of the worksheet the data that explain the changes in the balance sheet accounts other than cash and their effects on the statement of cash flows. (3) Enter on the cash line and at the bottom of the worksheet the increase or decrease in cash. This entry should enable the totals of the reconciling columns to be in agreement.

images

ILLUSTRATION 13-2 CONVERSION FROM ACCRUAL BASIS TO CASH BASIS (L.O. 3, **6)

images

Accrual Basis

Revenues Earned

- Expenses Incurred

= Net Income

Cash Basis

Cash In from Customers

- Cash Out for Operations

= Net Cash Provided by Operating Activities

INDIRECT METHOD
To Compute Net Cash Provided by Operating Activities:

Net income

Add noncash charges (such as depreciation expense and amortization of intangibles)

Add losses on sale of assets ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required