Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 103

Cash flows from operating, investing, and financing activities—direct method The following information is available from Bromfield Co.’s accounting records for the year ended December 31, 2010 (amounts in millions):

Cash dividends declared and paid	$ 340
Interest and taxes paid	90
Collections from customers	1,350
Payment of long-term debt	220
Purchase of land and buildings	170
Cash paid to suppliers and employees	810
Issuance of preferred stock	300
Proceeds from the sale of equipment	40

Required:

a. Calculate the net cash provided (used) by operating activities for Bromfield Co. for the year ended December 31, 2010.

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b. Calculate the net cash provided (used) by investing activities.

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c. Calculate the net cash provided (used) by financing activities.

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d. Calculate the net increase (decrease) in cash for the year.

Step 1 of 6

Prepare cash flow statement by using direct method:

Cash flow statement:

• It is the financial statement that estimates the total of cash generated or used in a company’s business during a given period.

• Cash flow statement is one of the important and mandatory reports from the company’s financial reports. Cash flow statement records the transactions, which are related to cash, and cash equivalents.

• It shows how cash is coming into the company and how it is going; and it will be prepared for one particular accounting period. This statement is divided into three parts operating, investing, and financing.