Exercise 21-24
Refer to the data provided in Exercise 21-23 for Myriad Products
Company.
Prepare the cash flows from operating activities section of the statement
of cash flows for Myriad Products Company using the indirect
method.
method
Analysis: First determine the items in the income statement that did not
have any cash impact.
Depreciation expense (add back)
Patent amortization expense (add back)
Loss on sale of cash equivalents (add back)
E
Extraordinary
di
loss,
l
net off tax (add
( dd back)
b k)
Next, equate the change in the balance sheet account to a change in cash.
If the balance sheet account is debited, then cash is credited. If the
balance sheet account is credited, then cash is debited.
©Dr. Chula King
All Rights Reserved
Exercise 21-24 (continued)
Net income
Non-cash items:
Depreciation expense (Dr Cash; Cr Acc. Dep’n)
Patent amortization (Dr Cash; Cr Patent)
L
Loss
on cashh equiv.
i (Eliminate
(Eli i t loss)
l )
Extraordinary loss, net of tax (Eliminate loss)
Changes in operating assets and liabilities:
Decrease in A/R (Dr Cash; Cr A/R)
Decrease in Inventory (Dr Cash; Cr Inventory)
Increase in A/P (Dr Cash; Cr A/P)
Decrease in Sal/P (Dr Sal/P; Cr Cash)
Increase in Interest payable (Dr Cash; Cr Int/P)
Increase in Tax payable (Dr Cash; Cr Tax/P)
Net cash flows from operating activities
©Dr. Chula King
All Rights Reserved
$86
90
5
3
10
12
10
6
(6)
5
5
$226