Torbram Incs policy is to report all cash flows arising from interest and dividends in the operating
Question:
Torbram Inc’s policy is to report all cash flows arising from interest and dividends in the operating sections. Torbram owns a 30% interest in an associated company, Rex Inc, and accounts for this investment using the equity method. Torbram’s activities for the year ended December 31, 2019, included the following: ·
Net income totalled $ 625,000, including $ 60,000 in investment income arising from its investment in Rex. ·
Received $ 20,000 in dividends from Toby that was declared in 2018. ·
Declared a cash dividend of $ 40,000 that was payable on January 5, 2020. ·
Interest expense for the year was $ 28,000; the opening and closing balances in the interest payable account was $ 17,000 and $ 21,000 respectively. ·
Total income tax expense for the year was $ 65,000; the current taxes payable account increased $ 3,000 and the deferred taxes liability increased $ 5,000. ·
Accounts receivable decreased $ 16,000 and accounts payable decreased $ 14,000 during the year. ·
Torbram sold equipment for $ 15,000 cash that had a net book value of $ 14,000. ·
Depreciation expense for the year totalled $ 62,000. · Torbram leased right of use equipment valued at $ 39,000.
The company made one payment of $ 4,500 during the year; $ 2,900 was allocated to interest expense with the remaining $ 1,600 reducing the lease liability.
Prepare the cash flow from the operating activities section of the statement of cash flow for Torbram using the indirect method
Identify how the activities detailed above that are not operating activities would be reported in the statement of cash flows.
What are the alternatives for Torbram to report dividends received and paid assuming the company adopts IFRS?
Expert Answer:
Cash Flows from Operating Activities Net Income 625000 Adjustments for Investment Inc... View the full answer
