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

Exercise 101

Prepare a statement of cash flows—indirect method The financial statements of Pouchie Co. included the following information for the year ended December 31, 2010 (amounts in millions):

Depreciation and amortization expense	$ 520
Cash dividends declared and paid	660
Purchase of equipment	1,640
Net income	768
Beginning cash balance	240
Proceeds of common stock issued	296
Proceeds from sale of building (at book value)	424
Accounts receivable increase	32
Ending cash balance	80
Inventory decrease	76
Accounts payable increase	88

Required:

Complete the following statement of cash flows, using the indirect method:

POUCHIE CO. Statement of Cash Flows For the Year Ended December 31, 2010
Cash Flows from Operating Activities: Net income Add (deduct) items not affecting cash:	$ 768
Net cash provided (used) by operating activities Cash Flows from Investing Activities:	$
Net cash provided (used) by investing activities Cash Flows from Financing Activities:	$
Net cash provided (used) by financing activities Net increase (decrease) in cash for the year Cash balance, January 1, 2010 Cash balance, December 31, 2010	$   $  240 $ 80

Step 1 of 2

Preparation of cash flow statement by using indirect 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.