Statement of Cash Flow - Micro Business Pub ?· Figure 18.1 Statement of Cash Flow (Direct Method) Statement…

Download Statement of Cash Flow - Micro Business Pub ?· Figure 18.1 Statement of Cash Flow (Direct Method) Statement…

Post on 19-Jul-2018

212 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

<ul><li><p>Management Accounting | 337</p><p>Statement of Cash Flow</p><p>Cash is obviously an important asset to all, both individually and in business. A shortage or lack of cash may mean an inability to purchase needed inventory or equipment or to pay debt. A sustained period of a cash shortage can result in bankruptcy. Cash, unlike some assets such and plant and equipment, is not an unchanging asset in the short run. Rather it is an asset that is constantly changing on a daily basis. Cash is subject to an inflow and an outflow. The balance of cash rises and cash falls with changes in the rates of inflow and outflow. The management of cash is critical and the amount of cash is affected directly by many different management decisions.</p><p>Nature and Purpose of the Statement of Cash Flow StatementFor many years accountants tended to downplay the importance of cash flow. It </p><p>is only recently that a statement of cash flow has been required. In 1987, the FASB issued FAS 95 and in that release the statement of cash flow was made mandatory. Prior to this, a Statement of Changes in Financial Position was recommended in APB opinion 19 (although not absolutely mandated) This statement was oriented to explaining changes in working capital rather than cash flow. However in the decade </p></li><li><p> 338 | CHAPTER EIGHTEEN Statement of Cash Flow</p><p>prior to the 1980s, many financial analysts began to argue that periodic cash flow was more useful than the measurement of net income in making many investment decisions. It was argued rather fervently by some financial analysts and theorists that depreciation was a source of funds. Accountants just as fervently argued that depreciation was never a source of funds. However, financial analysts adopted the practice of approximating cash flow by adding back to net income depreciation and other non cash amortized items. Consequently, the formula, NCF = net income + depreciation, was frequently seen in finance articles and finance textbooks.</p><p>The management of cash flow is a critical function of management. In this regard, it also important for the accountant to provide timely information about cash flow. The information required for the cash flow statement can be found in the cash account; however, in practice the cash account is not actually the direct source of information used to prepare the statement of cash flow. The source is actually the current income statement plus a comparative balance sheet as of the end of the current year. However, in order to understand how the statement is prepared, some discussion of the cash account is required. It is helpful to understand what transactions directly increase or decrease cash.</p><p>The items listed below are some of the main categories of business transactions that affect cash flow.</p><p>Cash</p><p>Debit Credit</p><p>SalesSale of propertyReceipt of dividendsIssue of stock Issue of bondsIssue of stockReceipt of interest income</p><p>PurchasesOperating ExpensesPurchase of materialsPurchase of propertyPayment of dividendsPayment of expensesPurchase of investmentsPurchase of treasury stockRetirement of bondsPurchase of treasury stockPayment of interest</p><p>The technical aspects of preparing a statement of cash flow can be quite complex and initially rather intimidating. A variety of methods and work sheet techniques can be found that suggest how to prepare the cash flow statement. The purpose here is not to make you an expert in preparing the statement, but rather the purpose is to help the you as a student understand the issues and problems involved in preparing the statement. There are two methods used to prepare the statement. Depending on which method is used, the appearance of the statement can be quite different. These two methods are commonly called the:</p><p>a. Direct methodb. Indirect method.</p></li><li><p>Management Accounting | 339</p><p> Fig</p><p>ure </p><p>18.1</p><p>Stat</p><p>emen</p><p>t of C</p><p>ash </p><p>Flow</p><p> (D</p><p>irect</p><p> Met</p><p>hod)</p><p>Stat</p><p>emen</p><p>t of C</p><p>ash </p><p>Flow</p><p> (I</p><p>ndire</p><p>ct M</p><p>etho</p><p>d)</p><p>Cas</p><p>h flo</p><p>w fr</p><p>om o</p><p>pera</p><p>ting </p><p>activ</p><p>ities</p><p> S</p><p>ourc</p><p>es:</p><p>Cas</p><p>h S</p><p>ales</p><p> and</p><p> col</p><p>lect</p><p>ions</p><p> of A</p><p>/R</p><p> U</p><p>ses:</p><p>Cos</p><p>t of g</p><p>oods</p><p> sol</p><p>d </p><p> C</p><p>ash </p><p>oper</p><p>atin</p><p>g ex</p><p>pens</p><p>es </p><p>Inte</p><p>rest</p><p> exp</p><p>ense</p><p>Net</p><p> cas</p><p>h flo</p><p>w fr</p><p>om o</p><p>pera</p><p>tions</p><p>Cas</p><p>h flo</p><p>w fr</p><p>om fi</p><p>nanc</p><p>ing </p><p>activ</p><p>ities</p><p>Sou</p><p>rces</p><p>: </p><p> S</p><p>ale </p><p>of b</p><p>onds</p><p>Loan</p><p> from</p><p> ban</p><p>k </p><p> Is</p><p>sue </p><p>of s</p><p>tock</p><p> U</p><p>ses:</p><p>Pay</p><p>men</p><p>t of d</p><p>ivid</p><p>ends</p><p>Net</p><p> cas</p><p>h flo</p><p>w fr</p><p>om fi</p><p>nanc</p><p>ing </p><p>activ</p><p>ities</p><p>Cas</p><p>h flo</p><p>w fr</p><p>om in</p><p>vest</p><p>ing </p><p>activ</p><p>ities</p><p> S</p><p>ourc</p><p>es:</p><p>Sal</p><p>e of</p><p> pla</p><p>nt e</p><p>quip</p><p>men</p><p>t </p><p>Use</p><p>s: </p><p> P</p><p>urch</p><p>ase </p><p>of p</p><p>lant</p><p> equ</p><p>ipm</p><p>ent</p><p>Net</p><p> cas</p><p>h flo</p><p>w fr</p><p>om in</p><p>vest</p><p>ing </p><p>activ</p><p>ities</p><p> D</p><p>ecre</p><p>ase </p><p>in c</p><p>ash</p><p> B</p><p>egin</p><p>ning</p><p> cas</p><p>h ba</p><p>lanc</p><p>e</p><p>Endi</p><p>ng c</p><p>ash </p><p>bala</p><p>nce</p><p>$128</p><p>,000</p><p>165,</p><p>000</p><p>24,0</p><p>008,</p><p>000</p><p>$20,</p><p>000</p><p>10,0</p><p>0020</p><p>,000</p><p>5,00</p><p>0</p><p>32,0</p><p>00</p><p>25,0</p><p>00</p><p>($69</p><p>,000</p><p>)</p><p>$45,</p><p>000</p><p> $ 7</p><p>,000</p><p>($</p><p>17,0</p><p>00)</p><p>95,0</p><p>00 </p><p>-</p><p>$78,</p><p>000</p><p>-</p><p>-</p><p>Cas</p><p>h flo</p><p>w fr</p><p>om o</p><p>pera</p><p>ting </p><p>activ</p><p>ities</p><p> N</p><p>et in</p><p>com</p><p>e: </p><p>Adj</p><p>ustm</p><p>ents</p><p> to n</p><p>et in</p><p>com</p><p>e: </p><p> A</p><p>dd:</p><p> D</p><p>ecre</p><p>ase </p><p>in m</p><p>ater</p><p>ials</p><p> inve</p><p>ntor</p><p>y </p><p>Dep</p><p>reci</p><p>atio</p><p>n </p><p> D</p><p>educ</p><p>t: </p><p>Dec</p><p>reas</p><p>e in</p><p> acc</p><p>ount</p><p>s pa</p><p>yabl</p><p>e </p><p>Incr</p><p>ease</p><p> in fi</p><p>nish</p><p>ed g</p><p>oods</p><p> G</p><p>ain </p><p>on s</p><p>ale </p><p>of e</p><p>quip</p><p>men</p><p>t </p><p>Incr</p><p>ease</p><p> in a</p><p>ccou</p><p>nts </p><p>rece</p><p>ivab</p><p>le</p><p> N</p><p>et c</p><p>ash </p><p>flow</p><p> from</p><p> ope</p><p>ratin</p><p>g ac</p><p>tiviti</p><p>es</p><p>Cas</p><p>h flo</p><p>w fr</p><p>om fi</p><p>nanc</p><p>ing </p><p>activ</p><p>ities</p><p> S</p><p>ourc</p><p>es:</p><p>Sal</p><p>e of</p><p> bon</p><p>ds </p><p> Lo</p><p>an fr</p><p>om b</p><p>ank</p><p> Issu</p><p>e of</p><p> sto</p><p>ck </p><p> U</p><p>ses:</p><p>Pay</p><p>men</p><p>t of d</p><p>ivid</p><p>ends</p><p>Net</p><p> cas</p><p>h flo</p><p>w fr</p><p>om fi</p><p>nanc</p><p>ing </p><p>activ</p><p>ities</p><p>Cas</p><p>h flo</p><p>w fr</p><p>om in</p><p>vest</p><p>ing </p><p>activ</p><p>ities</p><p> S</p><p>ourc</p><p>es:</p><p>Sal</p><p>e of</p><p> pla</p><p>nt e</p><p>quip</p><p>men</p><p>t </p><p>Use</p><p>s: </p><p> P</p><p>urch</p><p>ase </p><p>of p</p><p>lant</p><p> equ</p><p>ipm</p><p>ent</p><p>Net</p><p> cas</p><p>h flo</p><p>w fr</p><p>om in</p><p>vest</p><p>ing </p><p>activ</p><p>ities</p><p> D</p><p>ecre</p><p>ase </p><p>in c</p><p>ash</p><p> B</p><p>egin</p><p>ning</p><p> cas</p><p>h ba</p><p>lanc</p><p>e</p><p>Endi</p><p>ng c</p><p>ash </p><p>bala</p><p>nce </p><p>$30,</p><p>000</p><p>25,0</p><p>00</p><p>90,0</p><p>0025</p><p>,000</p><p>10,0</p><p>0022</p><p>,000</p><p>$20,</p><p>000</p><p>10,0</p><p>0020</p><p>,000</p><p>5,00</p><p>0</p><p>-</p><p>$32,</p><p>000</p><p>25,0</p><p>00</p><p>-</p><p>$42,</p><p>000</p><p>($11</p><p>1,00</p><p>0)</p><p>($69</p><p>,000</p><p>)</p><p>$45,</p><p>000</p><p>$ 7</p><p>,000</p><p>-</p><p>($17</p><p>,000</p><p>)95</p><p>,000</p><p>-</p><p>$78,</p><p>000</p><p>-</p><p>-</p></li><li><p> 340 | CHAPTER EIGHTEEN Statement of Cash Flow</p><p>Figure 18.1 shows both of these methods. Before commenting on the similarities and differences in these two formats, the purpose and nature of the statement needs to be discussed first. The FASB in promulgating standards and guidelines required that cash flow transactions and events be categorized under three headings:</p><p>1. Cash flow from operating activities2. Cash flow from financing activities3. Cash flow from investing activities</p><p>In this regard, the two cash flow statements in Figure 18.1 are exactly the same. The major difference is then in how cash flow from operating activities are determined and shown. The amount of cash flow from operating activities is exactly the same; however, the methodology and format are quite different.</p><p>The objective of the statement of cash flow is to show the three types of activities on a pure cash basis. However, the income statement, which is a major source of cash flow information, is prepared on an accrual basis. Logically, cash flow from operations should be:</p><p>Change in cash = Cash revenue less cash expenses.The problem is that the income statement which is based on accrual basis </p><p>accounting principles includes non cash revenues and expenses. However, given a comparative balance sheet, the cash revenues and cash expenses can be fairly accurately determined. By analyzing the changes in the accounts that are most directly affected by accrual basis accounting, cash revenue and cash expenses can be determined.</p><p>The accounts directly affected by accrual basis accounting are:1. Sales2. Purchases3. Operating expenses4. Accounts receivables5. Accounts payable6. Prepaid expenses7. Accrued liabilities such as accrued wages payable8. Accrued assets such as accrued interest receivable</p><p>In the indirect method, the starting point for cash flow from operating activities is net income. Even though net income is not the correct measure of net cash flow, it has been found that it is much easier to start with net income and then make certain necessary adjustments for items that did not affect net income but that cause change in cash flow. By carefully measuring the changes in these current asset and current liability accounts, the proper adjustments can be made to sales, purchases, and operating expenses</p><p>Figure 18.2 are shown some selected accrual basis individual transactions that require adjustment. How these items are recorded under accrual basis accounting and cash basis accounting is shown, and then the adjustment required to convert the </p></li><li><p>Management Accounting | 341</p><p>Tran</p><p>sact</p><p>ions</p><p>Acc</p><p>rual</p><p> bas</p><p>is E</p><p>ntry</p><p>Cas</p><p>h B</p><p>asis</p><p> Ent</p><p>ryA</p><p>djus</p><p>tmen</p><p>ts(C</p><p>onve</p><p>rtin</p><p>g ac</p><p>crua</p><p>l bas</p><p>is </p><p>to c</p><p>ash </p><p>basi</p><p>s)</p><p>1. S</p><p>ales</p><p> for t</p><p>he </p><p>year</p><p> in th</p><p>e am</p><p>ount</p><p> of</p><p> $10</p><p>0,00</p><p>0 is</p><p> re</p><p>cord</p><p>ed. O</p><p>f thi</p><p>s am</p><p>ount</p><p> on </p><p>80%</p><p> w</p><p>as c</p><p>olle</p><p>cted</p><p>.</p><p>Cas</p><p>h $8</p><p>0,00</p><p>0A</p><p>ccou</p><p>nts </p><p>rece</p><p>ivab</p><p>le </p><p>$20,</p><p>000</p><p> S</p><p>ales</p><p> $</p><p>100,</p><p>000</p><p>Cas</p><p>h $8</p><p>0,00</p><p>0 </p><p>Sal</p><p>es </p><p> $8</p><p>0,00</p><p>0D</p><p>irect</p><p> Met</p><p>hod:</p><p> S</p><p>ales</p><p> $ </p><p>100,</p><p>000</p><p> Le</p><p>ss: I</p><p>ncre</p><p>ase </p><p>in A</p><p>/R </p><p>20,0</p><p>00 </p><p>Cas</p><p>h sa</p><p>les </p><p>$ 80</p><p>,000</p><p>Indi</p><p>rect</p><p> Met</p><p>hod:</p><p> N</p><p>et in</p><p>com</p><p>e $ </p><p>100,</p><p>000</p><p> Le</p><p>ss: I</p><p>ncre</p><p>ase </p><p>in A</p><p>/R </p><p>$ 2</p><p>0,00</p><p>0 </p><p>Cas</p><p>h flo</p><p>w -o</p><p>per. </p><p>Act</p><p>iviti</p><p>es </p><p> $80</p><p>,000</p><p>2. T</p><p>he c</p><p>ompa</p><p>ny </p><p>purc</p><p>hase</p><p>d $6</p><p>0,00</p><p>0 of</p><p> raw</p><p> m</p><p>ater</p><p>ial. </p><p>Of t</p><p>his </p><p>amou</p><p>nt o</p><p>nly </p><p>80%</p><p> was</p><p> use</p><p>d in</p><p> cu</p><p>rren</p><p>t pro</p><p>duct</p><p>ion.</p><p> A</p><p>ssum</p><p>e n</p><p>o sa</p><p>les </p><p>wer</p><p>e m</p><p>ade.</p><p>Mat</p><p>eria</p><p>ls in</p><p>vent</p><p>ory </p><p>$12,</p><p>000</p><p> Fin</p><p>ishe</p><p>d go</p><p>ods </p><p>$48,</p><p>000</p><p> C</p><p>ash </p><p> $6</p><p>0,00</p><p>0</p><p>Not</p><p>e: M</p><p>ater</p><p>ial p</p><p>urch</p><p>ased</p><p> will</p><p> be </p><p>in th</p><p>e co</p><p>urse</p><p> of </p><p>a pe</p><p>riod </p><p>be:</p><p> 1.</p><p> N</p><p>ot u</p><p>sed</p><p> 2.</p><p> Bec</p><p>ome </p><p>part </p><p>of fi</p><p>nish</p><p>ed g</p><p>oods</p><p> 3.</p><p> Bec</p><p>ome </p><p>part </p><p>of c</p><p>ost o</p><p>f goo</p><p>ds s</p><p>old</p><p>Mat</p><p>eria</p><p>ls e</p><p>xpen</p><p>se </p><p>$60,</p><p>000</p><p> C</p><p>ash </p><p> $6</p><p>0,00</p><p>0D</p><p>irect</p><p> Met</p><p>hod:</p><p> C</p><p>ost o</p><p>f goo</p><p>ds s</p><p>old </p><p>0 </p><p>Ded</p><p>uct: </p><p>Incr</p><p>ease</p><p> in M</p><p>at. </p><p>$12,</p><p>000</p><p> D</p><p>educ</p><p>t In</p><p>crea</p><p>se in</p><p> FG</p><p> $4</p><p>8,00</p><p>0 </p><p>Cas</p><p>h pa</p><p>id fo</p><p>r mat</p><p>eria</p><p>ls </p><p>($60</p><p>,000</p><p>)</p><p>Indi</p><p>rect</p><p> Met</p><p>hod:</p><p> N</p><p>et in</p><p>com</p><p>e 0</p><p> D</p><p>educ</p><p>t: in</p><p>crea</p><p>se in</p><p> Mat</p><p> $1</p><p>2,00</p><p>0 </p><p>Ded</p><p>uct: </p><p> Inc</p><p>reas</p><p>e in</p><p> FG</p><p> $4</p><p>8,00</p><p>0 </p><p>Cas</p><p>h flo</p><p>w-o</p><p>per. </p><p>Act</p><p>iviti</p><p>es </p><p>($60</p><p>,000</p><p>)</p><p>Figu</p><p>re 1</p><p>8.2</p></li><li><p> 342 | CHAPTER EIGHTEEN Statement of Cash Flow</p><p>3 Th</p><p>e co</p><p>mpa</p><p>ny </p><p>purc</p><p>hase</p><p>d $6</p><p>0,00</p><p>0 in</p><p> m</p><p>ater</p><p>ials</p><p>. Onl</p><p>y 75</p><p>% w</p><p>as p</p><p>aid </p><p>in </p><p>cash</p><p>. Six</p><p>ty p</p><p>er </p><p>cent</p><p> was</p><p> use</p><p>d an</p><p>d so</p><p>ld a</p><p>s pa</p><p>rt of</p><p> pr</p><p>oduc</p><p>tion.</p><p>Mat</p><p>eria</p><p>ls in</p><p>vent</p><p>ory </p><p>$60,</p><p>000</p><p> C</p><p>ash </p><p> $4</p><p>5,00</p><p>0 </p><p>Acc</p><p>ount</p><p>s pa</p><p>yabl</p><p>e </p><p>$15,</p><p>000</p><p> C</p><p>ost o</p><p>f goo</p><p>ds s</p><p>old </p><p>$36,</p><p>000</p><p> M</p><p>ater</p><p>ial i</p><p>nven</p><p>tory</p><p>$36,</p><p>000</p><p>Mat</p><p>eria</p><p>ls e</p><p>xpen</p><p>se </p><p>$45,</p><p>000</p><p> C</p><p>ash </p><p> $</p><p>45,0</p><p>00D</p><p>irect</p><p> met</p><p>hod:</p><p> C</p><p>ost o</p><p>f goo</p><p>d so</p><p>ld </p><p>($36</p><p>,000</p><p>) </p><p>Add</p><p>: Inc</p><p>reas</p><p>e in</p><p> A/P</p><p> $1</p><p>5,00</p><p>0 </p><p>Ded</p><p>uct: </p><p>incr</p><p>ease</p><p> in m</p><p>at. </p><p>$24,</p><p>000</p><p> C</p><p>ash </p><p>expe</p><p>nded</p><p> for m</p><p>at. </p><p>($45</p><p>,000</p><p>)In</p><p>dire</p><p>ct m</p><p>etho</p><p>d: </p><p>Net</p><p> loss</p><p> ($</p><p>36,0</p><p>00)</p><p> A</p><p>dd: i</p><p>ncre</p><p>ase </p><p>in A</p><p>/P </p><p>$15,</p><p>000</p><p> D</p><p>educ</p><p>t: in</p><p>cr. I</p><p>n M</p><p>ater</p><p>ial </p><p>$24,</p><p>000</p><p>Cas</p><p>h flo</p><p>w-o</p><p>per. </p><p>Act</p><p>iviti</p><p>es </p><p>($45</p><p>,000</p><p>) </p><p>4. T</p><p>he c</p><p>ompa</p><p>ny </p><p>purc</p><p>hase</p><p>d $6</p><p>0,00</p><p>0 in</p><p> m</p><p>ater</p><p>ials</p><p>. Onl</p><p>y 75</p><p>% w</p><p>as p</p><p>aid </p><p>in c</p><p>ash.</p><p> Of t</p><p>he </p><p>60,0</p><p>00 o</p><p>nly </p><p>80%</p><p> was</p><p> use</p><p>d in</p><p> pro</p><p>duct</p><p>ion.</p><p> A</p><p>ssum</p><p>e no</p><p>ne w</p><p>as </p><p>sold</p><p>.</p><p>Mat</p><p>eria</p><p>ls in</p><p>vent</p><p>ory </p><p>$60,</p><p>000</p><p> C</p><p>ash </p><p> $4</p><p>5,00</p><p>0 </p><p>Acc</p><p>ount</p><p>s pa</p><p>yabl</p><p>e </p><p>$15,</p><p>000</p><p>Fini</p><p>shed</p><p> goo</p><p>ds </p><p>48,0</p><p>00 </p><p>Mat</p><p>eria</p><p>l inv</p><p>ento</p><p>ry </p><p> $4</p><p>8,00</p><p>0</p><p>Mat</p><p>eria</p><p>ls e</p><p>xpen</p><p>se </p><p>$45,</p><p>000</p><p> C</p><p>ash </p><p> $</p><p>45,0</p><p>00D</p><p>irect</p><p> Met</p><p>hod:</p><p> C</p><p>ost o</p><p>f goo</p><p>ds s</p><p>old </p><p>0 </p><p>Ded</p><p>uct: </p><p>Incr</p><p>ease</p><p> in M</p><p>at. </p><p>$12,</p><p>000</p><p> D</p><p>educ</p><p>t In</p><p>crea</p><p>se in</p><p> FG</p><p> $4</p><p>8,00</p><p>0 </p><p> $6</p><p>0,00</p><p>0A</p><p>dd: i</p><p>ncre</p><p>ase </p><p>in A</p><p>/P </p><p>$15.</p><p>000</p><p> C</p><p>ash </p><p>expe</p><p>nded</p><p> for m</p><p>ater</p><p>ial </p><p>($45</p><p>,000</p><p>)</p><p>Indi</p><p>rect</p><p> Met</p><p>hod:</p><p> N</p><p>et in</p><p>com</p><p>e 0</p><p> D</p><p>educ</p><p>t: in</p><p>crea</p><p>se in</p><p> Mat</p><p> $1</p><p>2,00</p><p>0 </p><p>Ded</p><p>uct: </p><p> Incr</p><p>ease</p><p> in F</p><p>G </p><p>$48,</p><p>000</p><p>($60</p><p>,000</p><p>) </p><p>Add</p><p>: inc</p><p>reas</p><p>e in</p><p>A/P</p><p> $1</p><p>5,00</p><p>0 </p><p>Cas</p><p>h flo</p><p>w-o</p><p>per. </p><p>Act</p><p>iviti</p><p>es </p><p>($45</p><p>,000</p><p>)</p></li><li><p>Management Accounting | 343</p><p>5. D</p><p>epre</p><p>ciat</p><p>ion </p><p>in th</p><p>e am</p><p>ount</p><p> of</p><p> $10</p><p>,000</p><p> was</p><p> re</p><p>cord</p><p>ed</p><p>Ope</p><p>ratin</p><p>g ex</p><p>pens</p><p>es </p><p>$10,</p><p>000</p><p> A</p><p>llow</p><p>. for</p><p> dep</p><p>reci</p><p>atio</p><p>n </p><p>$10,</p><p>000 </p><p> N</p><p>o en</p><p>tryD</p><p>irect</p><p> met</p><p>hod:</p><p> O</p><p>pera</p><p>ting </p><p>expe</p><p>nses</p><p> ($</p><p> 10,</p><p>000)</p><p> Le</p><p>ss: d</p><p>epre</p><p>ciat</p><p>ion </p><p>( $10</p><p>,000</p><p>) </p><p>Cas</p><p>h op</p><p>erat</p><p>ing </p><p>exp.</p><p> 0</p><p>Indi</p><p>rect</p><p> met</p><p>hod:</p><p> N</p><p>et lo</p><p>ss </p><p>($10</p><p>,000</p><p>) </p><p>Ded</p><p>uct d</p><p>epre</p><p>ciat</p><p>ion </p><p>($10</p><p>,000</p><p>) </p><p>Cas</p><p>h flo</p><p>w -o</p><p>per. </p><p>Act</p><p>iviti</p><p>es </p><p>0</p><p>6. P</p><p>lant</p><p> and</p><p> eq</p><p>uipm</p><p>ent w</p><p>hich</p><p> ha</p><p>d a </p><p>book</p><p> Val</p><p>ue </p><p>of $</p><p>12,0</p><p>00 w</p><p>as </p><p>sold</p><p> for $</p><p>12,0</p><p>00. </p><p>Cas</p><p>h $1</p><p>2,00</p><p>0 </p><p>Pan</p><p>t and</p><p> equ</p><p>ipm</p><p>ent </p><p> $1</p><p>0,00</p><p>0 </p><p>Gai</p><p>n on</p><p> sal</p><p>e </p><p>$ 2,</p><p>000</p><p>Cas</p><p>h $1</p><p>2,00</p><p>0 </p><p>Cas</p><p>hsa</p><p>le o</p><p>f P&amp;</p><p>E </p><p> $1</p><p>2,00</p><p>0D</p><p>irect</p><p> Met</p><p>hod</p><p> O</p><p>ther</p><p> inco</p><p>me </p><p>$2,0</p><p>00 </p><p>Ded</p><p>uct: </p><p>gain</p><p> on </p><p>sale</p><p> $2</p><p>,000</p><p> Cas</p><p>h flo</p><p>w-o</p><p>per a</p><p>ctiv</p><p>ities</p><p> 0</p><p>Indi</p><p>rect</p><p> Met</p><p>hod:</p><p> N</p><p>et in</p><p>com</p><p>e $2</p><p>,000</p><p> D</p><p>educ</p><p>t: ga</p><p>in o</p><p>n sa</p><p>le </p><p>$2,0</p><p>00 </p><p>C</p><p>ash </p><p>flow</p><p> -ope</p><p>r. A</p><p>ctiv</p><p>ities</p><p> 0</p><p>Cas</p><p>h fro</p><p>m s</p><p>ale </p><p>wou</p><p>ld in</p><p> the </p><p>amou</p><p>nt o</p><p>f $1</p><p>2,00</p><p>0 be</p><p> sho</p><p>wn </p><p>as a</p><p> sou</p><p>rce </p><p>in th</p><p>e ca</p><p>sh fl</p><p>ow fr</p><p>om i