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The indirect method for the preparation of the operating activities section of the statement of cash flows:

The time period assumption:

Profitability is the ability to generate future revenues and meet long-term obligations.

Refer to the following selected financial information from Grasheim Corp. Compute the company’s current ratio.        Current Assets 306,450   Plant assets 388,000   Current Liabilities 107,800   Net sales 676,000   Net Income 75,000  

The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.

Saturn Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Saturn Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.  At December 31 Year 2 Year 1 Equipment $ 600,000   $ 750,000   Accumulated Depreciation-Equipment   428,000     500,000  

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.)

Vasquez Company reports net income of $305,000 for the year ended December 31. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, and a $100,000 decrease in notes payable. Calculate the cash provided (used) in operating activities using the indirect method.

Refer to the following selected financial information from Grasheim Corp. Compute the company’s current ratio.        Current Assets 306,450   Plant assets 388,000   Current Liabilities 107,800   Net sales 676,000   Net Income 75,000