HTB 1.1.013

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  • #242388

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    This forum is restricted to members of the associated course(s).

    Bishir Alia
    Participant

    Hello,

    I am wondering in this question, why did we not reversed the effects of non operating cash flow from the net income amount, as this is one of the steps to calculate CF from operations using indirect method.

    Cash receivable from the issue of common stock   800,000
    Cash paid for dividends   80,000
    Cash paid for the acquisition of land   1,500,000
    Cash received from the sale of available-for-sale debt securities    2,800,000

    thanks

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  • #242392

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    Lynn Roden
    HOCK international

    Hello Bishir Alia,

    Those items you listed are not included in the calculation of net income. Since they are not included, they do not need to be reversed.

    • Cash received from the issue of common stock is not an income item. It is a cash inflow from financing activities, but it is not included in the calculation of net income.
    • Cash paid for dividends is not an expense item. It is a cash outflow for financing activities, but it is not included in the calculation of net income.
    • Cash paid for the acquisition of land is not an expense item. It is a cash outflow for investing activities, but it is not included in the calculation of net income.
    • Cash received from the sale of available-for-sale debt securities is not an income item. Only the portion of the cash that is a gain is included in income, and that amount ($700,000) has been subtracted from net income in the calculation of net cash provided by operating activities.

    Lynn

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