Purpose: (L.O. 6) This exercise will allow you to practice identifying how to classify transactions on a statement of cash flows using the direct method.
The J & M Salter Corporation uses the direct method for preparing the statement of cash flows. The following summarized transactions took place in 2014:
(a) Compute the following:
(b) If any transactions are not used in the required computations in (a), explain why.
(c) Based on the information given, prepare a statement of cash flows using the direct method. Assume the cash balance at the beginning of the year was $23,000.