Can somebody please clear this up for me. Is the gain from the sale of land and gain from the sale of property components of CFO? Thanks
the gain is included in net income if you work the indirect way of determining cfo you need to substract that gain. the gain will be refected in the cfi inflow in the sale price of the land or property
Thanks. I was using the gain during direct method calc.
for direct you just take sales and ignore any cfi inflows-sale of land etc
Can you please have a look at this one; and if you could, the working. thanks The Orange Company’s balance sheet as of December 31, 2001 was as follows: Dec. 31, 2000 Dec. 31, 2001 Cash $1,500,000 $1,900,000 Accounts Receivable 3,000,000 3,400,000 Inventory 2,300,000 2,500,000 Property, Plant & Equipment 16,700,000 19,700,000 Less Accumulated Depreciation (5,300,000) (8,200,000) Total Assets $18,200,000 $19,300,000 Accounts Payable $2,100,000 $1,900,000 Interest Payable 800,000 1,200,000 Income Taxes Payable 1,000,000 800,000 Notes Payable 2,700,000 2,900,000 Deferred Income Taxes 2,600,000 2,900,000 Common Stock 1,000,000 1,000,000 Retained Earnings 8,000,000 8,600,000 $18,200,000 $19,300,000 Orange’s interest expense was $900,0000 and income tax expense was $1,000,000 in 2001. Orange prepares its Statements of Cash Flows using the direct method. The other cash outflows section of Cash Flow from Operations (CFO) for 2001 would total: A) $1,400,000. B) $1,700,000. C) $2,100,000. D) $1,900,000.
way too much calculation for me … sorry
Other Cash Outflows: Interest Expense + Delta Interest Payable = -900000 + 400000 = -500000 Tax : Tax Expense + Delta Tax Payable = -1000000 – 200000 (Decrease) = -1200000 Total 1700000
answer is A. my worry is why no consideration for Inventory, AR and cash.
In the tax part you need to consider the effect of the 300K Deferred Inc Tax increase. This question is only asking about the DIRECT effect due to “Other cash expenses” So, since you do not have COGS, Sales, etc. etc. you cannot use the Inventory, AR, AP etc. components.