[Financial Accounting]

Assignment
Topic: Preparation and Interpretation of Cash Flows

Q.1. Briefly explain the cash flow statement purpose.

Q.2. Does the cash flow statement measure the financial sound business profitability? Explain

Q.3. Provide the cash receipts and cash payments two examples which are fit into the following
classifications.
a. Operating activities.
b. Investing activities.
c. Financing activities.
Q.4 ABC company has current year net income $430,000. The total depreciation expenses are for the
following year are $67,000. Within the year the company has experienced that the account receivable
(from sales to customers) are being increase of $35,000 and the increase of account payable (all to
suppliers) is $56,000.

Requirements
Compute the cash amount delivered by or being used for the operating activities through the indirect
method for the year ended 31, December 2014.

Q.5 The following data has been taken from the Shine Machinery Inc., income statement and balance
sheet:

Dec. 31, Jan. Jan. 1,2013

“Income statement:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . .$375,000
Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 115,000
Amortization of Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,000
Gain on Sale of Plant Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ….. 91,000
Loss on Sale of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …. . 34,000
Balance sheet:
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...$345,000 $380,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...513,000 575,000
Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …...23,000 10,000
Accounts Payable (to merchandise suppliers) . . . . . . . . . . . . . . . . …. 389,000 410,000
Accrued Expenses Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …. ..170,000 155,000”
“Use the above following information for the preparation of net cash flow from the operating activities
through the indirect method for the following year ended 31, December, 2013.”