What are the non-cash revenues, expenses, and other gains and losses that must b

Question

What are the non-cash revenues, expenses, and other gains and losses that must be added to or subtracted from net income in the operating activities section of the SCF? Please show your work!

What is the amount of net cash flows from operating activities?

Statement of Cash Flows (Indirect Method)-Comprehensive Example Mark's statement of financial position as of December 31, 2015 and 2014 and information relating to 2015 activities are presented below. December 31 20152014 Assets Cash Short-term investments Accounts civable (net) Inventory Long-term investments Trading securities Plant assets Accumulated depreciation Patent 440,000 800,000 1,050,000 1,130,000 400,000 $3,100,000 (700,000) 280,000 520,000 1,140,000 1,000,000 600,000 $2,000,000 (900,000) 300,000 Total assets Equity and Liabilities Accounts payable Other accrued liabilities Long-term notes payable Other long-term abilities Common Stock-$10 par Additional paid-in capital Retained earnings Deferred compensation 1,495,000240 000 250,000 200,000 560,000 $1,600,000 800,000 1,880,000 (35,000) 360,000 1,400,000 500,000 960,000 (50,000) Total equity and liabilities Information relating to 2015 activities .Net income for 2015 was $1,220,000 . Short-term investments consist of treasury bills maturing on September 30, 2016. Short-term investment purchases were paid with cash. . No bad debt expense was recorded .A long-term investment was sold for $345,000 and an unrealized loss on long-term investments was recorded for $20,000. There were no other transactions affecting long-term investments in 2015 Plant assets costing $1,000,000 and having a carrying amount of $320,000 were sold for $360,000. Payment on the sale was not received in 2015. Plant asset purchases were paid with cash. The decrease in other long-term liabilities did not affect cash or net income 20,000 ordinary shares were issued for $25 a share Dividends were paid with cash. . .

Explanation / Answer

The non cash expenses such a depreciation, amortisation are to be added back to the operating section of the Statement of cash flows. Also,any loss arising from the sale of assets are to be added back and any gains on sale of assets are to be subtracted.

The amount of net cash flows from operating activities is:

Unrealised gain on sale of plant(360000 - 320000)

Issue of share capital for cash and dividends paid affect cash but do not form part of operating activities, so they shall not be considered while calculating net cash flow from operating activities.

Net Income $1220000 Deduct: Depreciation expense (200000)

Unrealised gain on sale of plant(360000 - 320000)

(400000) Add: Loss on sale of investment 20000 640000 Add: Decrease in accounts receivable 90000 Increase in accounts payable 255000 Deduct: Purchase of short term investments (800000) Increase in inventory (130000) Decrease in other liabilities (50000) Net cash flow from opeating activities $5000

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