Hector Production Company uses the indirect method to prepare its statement of cash flows.The Treasury Stock account had a debit balance of $7,000 at the beginning of the year and a debit balance of $18,000 at the end of the year.No Treasury Stock was sold during the year.The financing section of the statement of cash flows will show a positive cash flow of $11,000 for the buy back of Treasury Stock.

Question

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The information provided suggests that there was an increase in the Treasury Stock account balance, which usually indicates a buyback of shares by the company. However, the increase in the Treasury Stock account balance isnot a source of cash, but rather a use of cash. Therefore, the financing section of the statement of cash flows would show a negative cash flow of $11,000 for the buyback of Treasury Stock, rather than a positive cash flow.

Hector Production Company Uses the Indirect Method to Prepare Its