**EXERCISE 13-8

Purpose: (L.O. 6) This exercise will allow you to practice identifying how to classify transactions on a statement of cash flows using the direct method.

The J & M Salter Corporation uses the direct method for preparing the statement of cash flows. The following summarized transactions took place in 2014:

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Instructions

(a) Compute the following:

  1. (1) Net cash provided (used) by operating activities.
  2. (2) Net cash provided (used) by investing activities.
  3. (3) Net cash provided (used) by financing activities.
  4. (4) Net increase (decrease) in cash for the period.

(b) If any transactions are not used in the required computations in (a), explain why.

(c) Based on the information given, prepare a statement of cash flows using the direct method. Assume the cash balance at the beginning of the year was $23,000.

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