Refer to the information for Granger Inc. in P5– 1.
In Problem
a. Purchased new equipment costing $ 50 by issuing long- term debt.
b. Received $ 90 on trade receivables.
c. Received and paid the telephone bills for $ 1.
d. Earned $ 100 in sales to customers on account; the cost of sales was $ 60.
e. Paid employees $ 10 for salaries earned in November.
f. Paid half of the income taxes payable.
g. Purchased inventory for $ 23 on account.
h. Prepaid rent for December for a warehouse for $ 12.
i. Paid $ 10 of long- term borrowings and $ + in interest on the debt.
j. Purchased a patent (an intangible asset) for $ 8 cash.
Required:
1. Prepare a spreadsheet similar to Exhibit 5.4 . Show the effects of the November 2014 transactions on the appropriate accounts, and on the three cash flow categories.
2. Prepare a table similar to Exhibit 5.5 showing both the cash and non- cash components of revenues and expenses for November 2014.
3. Prepare the operating activities section of the statement of cash flows for Granger Inc. for November 2014 using the direct method.
4. As a user of financial statements, would you prefer to see the cash flow from operating activities reported using the direct method or the indirect method? Justify your answer.