Statement of Cash Flows

Suppose a recent income statement for McDonald's Corporation shows cost of goods sold $4,852.7 million and operating expenses (including depreciation expense of $1,201 million) $10,671.5 million. the comparative balance sheet for the year shows that inventory increased $18,1 million, prepaid expenses increased $56.3 million, accounts payable (merchandise suppliers) increased $136.9 million, and accrued expenses payable increased $160.9 million.

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Solution

The following information is taken from the 2020 general ledger of Swisher Company

Instructions

In each case, compute the amount that should be reported in the operating activities section of the statement of cash flows under the direct method.

Solution

Comparative balance sheets for International Company are presented below

1. Net income for 2020 was $135,000.
2. Cash dividends of $70,000 were declared and paid.
3. Bonds payable amounting to $50,000 were redeemed for cash $50,000
4. Common stock was issued for $50,000 cash.
5. Depreciation expense was $24,000.
6. Sales revenue for the year was $978,000.
7. Land was sold at cost, and equipment was purchased for cash.

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