Module Assignment

For this assignment, please answer the following questions:

1.     What is the principal disadvantage of the direct method of reporting cash flows from operating activities?

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2.     What are the major advantages of the indirect method of reporting cash flows from operating activities?

3.     A corporation issued $2,000,000 of common stock in exchange for $2,000,000 of fixed assets. Where would this transaction be reported on the statement of cash flows?

4.     A retail business, using the accrual method of accounting, owed merchandise creditors (accounts payable) $320,000 at the beginning of the year and $350,000 at the end of the year. How would the $30,000 increase be used to adjust net income in determining the amount of cash flows from operating activities by the indirect method? Explain.

Where possible include in-text citation and references


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