Effects of transactions on the statement of cash flows presents a simplified statement of cash flows. For each of the transactions that follow, indicate the number(s) of the line(s) in affected by the transaction and the amount and direction (increase or decrease) of the effect. Expand the definition of Line (1) to include receipts from other operating revenue sources. If the transaction affects net income, be sure to indicate whether it increases or decreases. Ignore income tax effects.
a. A firm sells for $12,000 equipment that originally cost $30,000 and has accumulated depreciation of $16,000 at the time of sale.
b. A firm owns 25% of the common stock of an investee acquired several years ago at its net book value and uses the equity method. The investee had net income of $80,000 and paid dividends of $20,000 during the period.
c. A firm, as lessee (tenant), records lease payments of $50,000 on capital leases for the period, of which $35,000 represents interest expense.
d. Income tax expense for the period totals $120,000, of which the firm pays $90,000 immediately and defers the remaining $30,000 because of temporary differences between the accounting principles used for financial reporting and those used for tax reporting.
e. A firm owns 10% of the common stock of an investee acquired at its net carrying value several years ago and accounts for it as an available for sale security classified as a long term investment. The investee had net income of $100,000 and paid dividends of $40,000 during the period. The market value at the end of the period equaled the market value at the beginning of the period.