The financial statements of Milk River Ltd. follow: Additional information: 1. Equipment costing $24,000 was purchased with
Question:
The financial statements of Milk River Ltd. follow:
Additional information:
1. Equipment costing $24,000 was purchased with an $8,000 down payment and the remainder was financed with a note payable.
2. During the year, equipment was sold for $10,500 cash. This equipment had cost $12,000 originally and had a carrying amount of $8,500 at the time of sale.
3. All depreciation expenses are included in the operating expenses category.
4. Notes payable were also repaid during the year.
Instructions
a. Prepare a cash flow statement for the year using the indirect method.
b. Prepare a cash flow statement for the year using the direct method.
If equipment was both purchased and sold during the year, is it important to show both of these transactions? Or is it sufficient to show only the net increase or decrease in equipment, similar to how increases and decreases in inventory are shown? Explain.
Step by Step Answer:
Accounting Principles Volume 2
ISBN: 9781119786634
9th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak