# ASC 230-10-55: Statement of Cash Flows — Overall — 55 Implementation Guidance and Illustrations

Source: FASB Accounting Standards Codification, Basic View

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## ASC 230-10-55: 55 Implementation Guidance and Illustrations

[Read section](https://asc.understandingaccounting.org/asc/230/10/#55-implementation-guidance-and-illustrations)

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#### Implementation Guidance

##### [230-10-55-1](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-1)

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Given sufficiently detailed information, major classes of operating [cash](https://asc.understandingaccounting.org/glossary/c/#cash "Consistent with common usage, cash includes not only currency on hand but demand deposits with banks or other financial institutions. Cash also includes other kinds of accounts that have the general characteristics of demand deposits in that the customer may deposit additional funds at any time and also effectively may withdraw funds at any time without prior notice or penalty. All charges and credits to those accounts are cash receipts or payments to both the entity owning the account and the bank holding it. For example, a bank's granting of a loan by crediting the proceeds to a customer's demand deposit account is a cash payment by the bank and a cash receipt of the customer when the entry is made.") receipts and payments may be determined indirectly by adjusting revenue and expense amounts for the change during the period in related asset and liability accounts. For example, cash collected from customers may be determined indirectly by adjusting sales for the change during the period in receivables from customers for the entity's delivery of goods or services. Likewise, cash paid to suppliers and employees may be determined indirectly by adjusting cost of sales and expenses (exclusive of depreciation, interest, and income taxes) for the change during the period in inventories and payables for operating items. That procedure, of course, requires the availability of information concerning the change during the period in the appropriate classes of receivables and payables. The more detailed the categories of operating cash receipts and payments to be reported, the more complex the procedure for determining them. For the resulting operating cash receipts and payments to be accurate, the effects of all noncash entries to accounts receivable and payable, inventory, and other balance sheets accounts used in the calculation shall be eliminated. For example, the change in accounts receivable would have to be determined exclusive of any bad debt write-offs and other noncash charges and credits to customer accounts during the period.

##### [230-10-55-2](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-2)

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Amounts of operating cash receipts and payments at the minimum level of detail specified in paragraph [230-10-45-25](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-25) often may be determined indirectly without incurring unduly burdensome costs over those involved in appropriately applying the indirect method. For example, determining net cash flow from [operating activities](https://asc.understandingaccounting.org/glossary/o/#operating-activities "Operating activities include all transactions and other events that are not defined as investing or financing activities (see paragraphs 230-10-45-12230-10-45-13230-10-45-14230-10-45-15). Operating activities generally involve producing and delivering goods and providing services. Cash flows from operating activities are generally the cash effects of transactions and other events that enter into the determination of net income.") by the indirect method requires the availability of the total amount of operating receivables. That is, any receivables for investing or financing items shall be segregated. Within the total amount of operating receivables, information on receivables from customers for an entity's delivery of goods or services may well be available separately from those for interest and dividends. Thus, it may be possible to determine indirectly cash collected from customers and interest and dividends received using much the same information needed to determine net cash flow from operating activities using the indirect method.

##### [230-10-55-3](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-3)

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The same procedure may be used to determine cash paid to suppliers and employees. Determining net cash flow from operating activities by the direct method requires the availability of the total amount of payables pertaining to operating activities. Within that amount, payables to suppliers and employees may well be available separately from those for interest and taxes. However, determining operating cash payments in more detail than the minimum specified in paragraph [230-10-45-25](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-25) might involve significant incremental costs over those already required to apply the indirect method because information on subcategories of payables to suppliers and employees may not be available.

##### [230-10-55-4](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-4)

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Many entities may well be able to determine amounts of operating cash receipts and payments at the minimum level of detail that this Subtopic encourages (see paragraph [230-10-45-25](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-25)) indirectly at reasonable cost by the procedure discussed in paragraphs

[230-10-55-1 through 55-3](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-1)

. But few, if any, entities have experimented with the procedure, and the degree of difficulty encountered in applying it undoubtedly would vary depending on the nature of an entity's operations and the features of its current accounting system.

#### Illustrations

##### [230-10-55-5](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-5)

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The Examples below provide illustrations for the preparation of statements of cash flows of business entities.

##### [230-10-55-6](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-6)

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Section 958-205-55 provides illustrations for the preparation of statements of cash flows for a not-for-profit entity (NFP).

##### [230-10-55-7](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-7)

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This Example illustrates a statement of cash flows under both the direct method and the indirect method for a domestic manufacturing entity.

##### [230-10-55-8](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-8)

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The illustrations of the reconciliation of net income to net cash provided by operating activities may provide detailed information in excess of that required for a meaningful presentation.

##### [230-10-55-9](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-9)

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Other formats or levels of detail may be appropriate for particular circumstances.

##### [230-10-55-10](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-10)

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The following is a statement of cash flows for the year ended December 31, 19X1, for Entity A, a U.S. corporation engaged principally in manufacturing activities. This statement of cash flows illustrates the direct method of presenting cash flows from operating activities, as encouraged in paragraph [230-10-45-25](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-25).

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-638931E4-C4B4-4B84-88DF-7770554AC579-low.gif)
    
    Entity A Consolidated Statement of Cash Flows "For the Year Ended December 31, 19X1" Cash flows from operating activities: Cash received from customers " $13,850 " Cash paid to suppliers and employees " (12,000)" Dividend received from affiliate 20 Interest received 55 Interest paid (net of amount capitalized) (220) Income taxes paid (325) Insurance proceeds received for business interruption 5 Cash paid to settle lawsuit for patent infringement (30) Net cash provided by operating activities "$1,355" Cash flows from investing activities: Proceeds from sale of facility 600 Payment received on note for sale of plant 150 Insurance proceeds received for damage to equipment 10 Capital expenditures " (1,000)" "Payment for purchase of Entity B, net of cash acquired" (925) Net cash used in investing activities "(1,165)" Cash flows from financing activities: Net borrowings under line-of-credit agreement 300 Principal payments under finance lease obligation (125) Proceeds from issuance of long-term debt 400 Proceeds from issuance of common stock 500 Dividends paid (200) Net cash provided by financing activities 875 "Net increase in cash, cash equivalents, and restricted cash" " 1,065 " "Cash, cash equivalents, and restricted cash at beginning of year" 600 "Cash, cash equivalents, and restricted cash at end of year" " $1,665 " Reconciliation of net income to net cash provided by operating activities: Net income $760 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization $445 Provision for losses on accounts receivable 200 Gain on sale of facility (80) Undistributed earnings of affiliate (25) Payment received on installment note receivable for sale of inventory 100 Gain on insurance proceeds received for damage to equipment (10) Change in assets and liabilities net of effects from purchase of Entity B: Increase in accounts receivable (215) Decrease in inventory 205 Increase in prepaid expenses (25) Decrease in accounts payable and accrued expenses (250) Increase in interest and income taxes payable 50 Increase in deferred taxes 150 Increase in other liabilities 50 Total adjustments 595 Net cash provided by operating activities "$1,355"

##### [230-10-55-11](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-11)

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The supplemental schedule of noncash [investing](https://asc.understandingaccounting.org/glossary/i/#investing-activities "Investing activities include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets, that is, assets held for or used in the production of goods or services by the entity (other than materials that are part of the entity's inventory). Investing activities exclude acquiring and disposing of certain loans or other debt or equity instruments that are acquired specifically for resale, as discussed in paragraphs 230-10-45-12 and 230-10-45-21.") and [financing activities](https://asc.understandingaccounting.org/glossary/f/#financing-activities "Financing activities include obtaining resources from owners and providing them with a return on, and a return of, their investment; receiving restricted resources that by donor stipulation must be used for long-term purposes; borrowing money and repaying amounts borrowed, or otherwise settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.") is as follows.

-   Entity A purchased all of the capital stock of Entity B for $950. In conjunction with the acquisition, liabilities were assumed as follows.
    
    -   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-820292CE-7F15-49A5-A491-22001388443E-low.gif)
        
        Fair value of assets acquired " $1,580 " Cash paid for the capital stock (950) Liabilities assumed $630
        
-   A finance lease obligation of $850 was incurred when Entity A entered into a lease for new equipment.
    
-   Additional common stock was issued upon the conversion of $500 of long-term debt.

##### [230-10-55-12](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-12)

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The disclosure of accounting policy is as follows.

-   For purposes of the statement of cash flows, the entity considers all highly liquid debt instruments purchased with a maturity of three months or less to be [cash equivalents](https://asc.understandingaccounting.org/glossary/c/#cash-equivalents "Cash equivalents are short-term, highly liquid investments that have both of the following characteristics: Readily convertible to known amounts of cash So near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less qualify under that definition. Original maturity means original maturity to the entity holding the investment. For example, both a three-month U.S. Treasury bill and a three-year U.S. Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations).").

##### [230-10-55-12A](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-12A)

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Shown below is an illustrative disclosure of the nature of restrictions on cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents required by paragraph [230-10-50-7](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-7), as well as an illustrative disclosure of the line items and amounts of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents reported within the statement of financial position that sum to the total of the same such amounts at the end of the period shown in the statement of cash flows as required by paragraph [230-10-50-8](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-8) (in this illustrative example, assume Entity A has no restricted cash equivalents). Comparative statements of financial position are provided in the illustrative example in paragraph [230-10-55-19](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-19) only to facilitate understanding of the statement of cash flows. For purposes of applying paragraphs

[230-10-50-7 through 50-8](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-7)

to this illustrative example, assume that the year ended December 31, 19X1, is the only period for which a statement of financial position is presented.

-   The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
    
    -   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-9F292DFC-41E4-41EF-8AFD-ADE34B1BD0BE-low.gif)
        
        12/31/19X1 Cash and cash equivalents " $1,465 " Restricted cash 125 Restricted cash included in other long-term assets 75 "Total cash, cash equivalents, and restricted cash shown in the statement of cash flows" " $1,665 "
        
-   Amounts included in restricted cash represent those required to be set aside by a contractual agreement with an insurer for the payment of specific workers' compensation claims. Restricted cash included in other long-term assets on the statement of financial position represents amounts pledged as collateral for long-term financing arrangements as contractually required by a lender. The restriction will lapse when the related long-term debt is paid off.

##### [230-10-55-13](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-13)

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The following is Entity A's statement of cash flows for the year ended December 31, 19X1, prepared using the indirect method, as described in paragraph [230-10-45-28](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-28).

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-1AC4885B-C7D2-4AC3-A887-F390C103549C-low.gif)
    
    Entity A Consolidated Statement of Cash Flows "For the Year Ended December 31, 19X1" Cash flows from operating activities: Net income $760 Depreciation and amortization $445 Provision for losses on accounts receivable 200 Gain on sale of facility (80) Undistributed earnings of affiliate (25) Payment received on installment note receivable for sale of inventory 100 Gain on insurance proceeds received for damage to equipment (10) Change in assets and liabilities net of effects from purchase of Entity B: Increase in accounts receivable (215) Decrease in inventory 205 Increase in prepaid expenses (25) Decrease in accounts payable and accrued expenses (250) Increase in interest and income taxes payable 50 Increase in deferred taxes 150 Increase in other liabilities 50 Total adjustments 595 Net cash provided by operating activities "1,355" Cash flows from investing activities: Proceeds from sale of facility 600 Payment received on note for sale of plant 150 Insurance proceeds received for damage to equipment 10 Capital expenditures " (1,000)" "Payment for purchase of Entity B, net of cash acquired" (925) Net cash used in investing activities "(1,165)" Cash flows from financing activities: Net borrowings under line-of-credit agreement 300 Principal payments under finance lease obligation (125) Proceeds from issuance of long-term debt 400 Proceeds from issuance of common stock 500 Dividends paid (200) Net cash provided by financing activities 875 "Net increase in cash, cash equivalents, and restricted cash" " 1,065 " "Cash, cash equivalents, and restricted cash at beginning of year" 600 "Cash, cash equivalents, and restricted cash at end of year" " $1,665 "

##### [230-10-55-14](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-14)

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The following table illustrates the supplemental disclosures of cash flow information.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-7A4FFADE-4DC7-4921-B4DC-02E16426C192-low.gif)
    
    Cash paid during the year for: Interest (net of amount capitalized) $220 Income taxes 325
    

Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance:

[740-10-65-9](https://asc.understandingaccounting.org/asc/740/10/#740-10-65-9) The following table illustrates the supplemental disclosures of cash flow information.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-7A4FFADE-4DC7-4921-B4DC-02E16426C192-low.gif)
    
    Cash paid during the year for: Interest (net of amount capitalized) $220 Income taxes 325
    

**Note:** This Example does not illustrate the disclosures of income taxes paid required by paragraphs

[740-10-50-22 through 50-23](https://asc.understandingaccounting.org/asc/740/10/#740-10-50-22)

, for the year ended December 31, 19X1.

##### [230-10-55-15](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-15)

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The supplemental schedule of noncash investing and financing activities is as follows.

-   Entity A purchased all of the capital stock of Entity B for $950. In conjunction with the acquisition, liabilities were assumed as follows.
    
    -   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-EE7AD6BE-19BC-423F-83D6-76B1037807A7-low.gif)
        
        Fair value of assets acquired " $1,580 " Cash paid for the capital stock (950) Liabilities assumed $630
        
-   A finance lease obligation of $850 was incurred when Entity A entered into a lease for new equipment.
    
-   Additional common stock was issued upon the conversion of $500 of long-term debt.

##### [230-10-55-16](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-16)

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[Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/).

##### [230-10-55-17](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-17)

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[Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/).

##### [230-10-55-18](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-18)

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The disclosure of accounting policy is as follows.

-   For purposes of the statement of cash flows, the Entity considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

##### [230-10-55-18A](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-18A)

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Shown below is an illustrative disclosure of the nature of restrictions on cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents required by paragraph [230-10-50-7](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-7), as well as an illustrative disclosure of the line items and amounts of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents reported within the statement of financial position that sum to the total of the same such amounts at the end of the period shown in the statement of cash flows as required by paragraph [230-10-50-8](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-8) (in this illustrative example, assume Entity A has no restricted cash equivalents). Comparative statements of financial position are provided in the illustrative example in paragraph [230-10-55-19](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-19) only to facilitate understanding of the statement of cash flows. For purposes of applying paragraphs

[230-10-50-7 through 50-8](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-7)

to this illustrative example, assume that the year ended December 31, 19X1, is the only period for which a statement of financial position is presented.

-   The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
    
    -   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-4F2AF9E5-975C-4E03-95F7-195ED087892B-low.gif)
        
        12/31/19X1 Cash and cash equivalents " $1,465 " Restricted cash 125 Restricted cash included in other long-term assets 75 "Total cash, cash equivalents, and restricted cash shown in the statement of cash flows" " $1,665 "
        
    
-   Amounts included in restricted cash represent those required to be set aside by a contractual agreement with an insurer for the payment of specific workers' compensation claims. Restricted cash included in other long-term assets on the statement of financial position represents amounts pledged as collateral for long-term financing arrangements as contractually required by a lender. The restriction will lapse when the related long-term debt is paid off.

##### [230-10-55-19](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-19)

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Source downloaded (UTC): 2026-09-09T23:11:40.068Z to 2026-09-09T23:11:40.068Z

Record version: sha256:514bb1f26e5395fc5fa3713fd09a15f13f38e02739a5fa387e4eb89367eb5373

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The following summarizes financial information for the current year for Entity A, which provides the basis for the statements of cash flows presented in paragraphs [230-10-55-10 through 55-18A](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-10).

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-757F8D00-64A3-4889-9AC7-E2B9FDB8A02C-low.gif)
    
    Entity A Consolidated Statement of Financial Position 1/1/X1 12/31/X1 Change Assets: Cash and cash equivalents $ 300 "$ 1,465" "$ 1,165" Restricted cash 225 125 (100) Accounts receivable (net of allowance for losses of $600 and $450) "1,770" "1,940" 170 Notes receivable 400 150 (250) Inventory "1,230" "1,375" 145 Prepaid expenses 110 135 25 Total current assets "4,035" "5,190" "1,155" Investments 250 275 25 "Property, plant, and equipment, at cost" "6,460" "8,460" "2,000" Accumulated depreciation "(2,100)" "(2,300)" (200) "Property, plant, and equipment, net" "4,360" "6,160" "1,800" Intangible assets 40 175 135 Other long-term assets 430 430 - Total noncurrent assets 5080 "7,040" "1,960" Total assets "$ 9,115" "$ 12,230" "$ 3,115" Liabilities: Accounts payable and accrued expenses "$ 1,085" "$ 1,090" $ 5 Interest payable 30 45 15 Income taxes payable 50 85 35 Short-term debt 450 750 300 Current portion of finance lease obligation - 125 125 Total current liabilities "1,615" "2,095" 480 Finance lease obligation - 600 600 Long-term debt "2,150" "2,425" 275 Deferred taxes 375 525 150 Other liabilities 225 275 50 Total noncurrent liabilities "2,750" "3,825" "1,075" Total liabilities "4,365" "5,920" "1,555" Stockholders' equity: Capital stock "2,000" "3,000" "1,000" Retained earnings "2,750" "3,310" 560 Total stockholders' equity "4,750" "6,310" "1,560" Total liabilities and stockholders' equity "$ 9,115" "$ 12,230" "$ 3,115" Entity A Consolidated Statement of Income "For the Year Ended December 31, 19X1" Sales " $13,965 " Cost of sales " (10,290)" Depreciation and amortization (445) "Selling, general, and administrative expenses" " (1,890)" Interest expense (235) Equity in earnings of affiliate 45 Gain on sale of facility 80 Interest income 55 Insurance proceeds 15 Loss from patent infringement lawsuit (30) Income before income taxes " 1,270 " Provision for income taxes (510) Net income $760
    
-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-84229CBD-5EE7-42E4-A460-9680EBC6B63D-low.gif)
    
    Entity A Consolidated Statement of Income "For the Year Ended December 31, 19X1" Sales " $13,965 " Cost of sales " (10,290)" Depreciation and amortization (445) "Selling, general, and administrative expenses" " (1,890)" Interest expense (235) Equity in earnings of affiliate 45 Gain on sale of facility 80 Interest income 55 Insurance proceeds 15 Loss from patent infringement lawsuit (30) Income before income taxes " 1,270 " Provision for income taxes (510) Net income $760

##### [230-10-55-20](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-20)

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Source downloaded (UTC): 2026-09-09T23:11:40.068Z to 2026-09-09T23:11:40.068Z

Record version: sha256:07421f0f6014f3b02992cdc5984c96efcdb20a5235ab8f52262b69cafb192a78

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The following transactions were entered into by Entity A during 19X1 and are reflected in the preceding financial statements:

1.  a
    
    Entity A wrote off $350 of accounts receivable when a customer filed for bankruptcy. A provision for losses on accounts receivable of $200 was included in Entity A's selling, general, and administrative expenses.
    
2.  b
    
    Entity A collected the third and final annual installment payment of $100 on a note receivable for the sale of inventory and collected the third of four annual installment payments of $150 each on a note receivable for the sale of a plant. Interest on these notes through December 31 totaling $55 was also collected.
    
3.  c
    
    Entity A received a distribution of $20 from an affiliate accounted for under the equity method of accounting. Entity A made an accounting policy election to apply the cumulative earnings approach described in paragraph [230-10-45-21D(a)](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-21D) and determined that the distribution was a return on investment.
    
4.  d
    
    Entity A sold a facility with a book value of $520 and an original cost of $750 for $600 cash.
    
5.  e
    
    Entity A constructed a new facility for its own use and placed it in service. Accumulated expenditures during the year of $1,000 included capitalized interest of $10.
    
6.  f
    
    Entity A entered into a capital lease for new equipment with a fair value of $850. The entity classified the lease as a finance lease. Principal payments under the lease obligation totaled $125.
    
7.  g
    
    Entity A purchased all of the capital stock of Entity B for $950 in a business combination. The fair values of Entity B's assets and liabilities at the date of acquisition are presented below.
    
    -   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-1328EA69-B497-4EBF-9041-75027FE9CDE6-low.gif)
        
        Cash $25 Accounts receivable 155 Inventory 350 "Property, plant, and equipment" 900 Patents 80 Goodwill 70 Accounts payable and accrued expenses (255) Long-term note payable (375) Net assets acquired $950
        
8.  h
    
    Entity A borrowed and repaid various amounts under a line-of-credit agreement in which borrowings are payable 30 days after demand. The net increase during the year in the amount borrowed against the line-of-credit totaled $300.
    
9.  i
    
    Entity A issued $400 of long-term debt securities.
    
10.  j
     
     Entity A's provision for income taxes included a deferred provision of $150.
     
11.  k
     
     Entity A's depreciation of property, plant, and equipment and amortization of right-of-use assets arising from a finance lease totaled $430, and amortization of intangible assets totaled $15.
     
12.  l
     
     Entity A's selling, general, and administrative expenses included an accrual for incentive compensation of $50 that has been deferred by executives until their retirement. The related obligation was included in other liabilities.
     
13.  m
     
     Entity A collected insurance proceeds of $15 ($5 from a business interruption claim that resulted when a storm precluded shipment of inventory for one week and $10 from a property claim that resulted when fully depreciated manufacturing equipment was damaged by a fire).
     
14.  n
     
     Entity A paid $30 to settle a lawsuit for patent infringement.
     
15.  o
     
     Entity A issued $1,000 of additional common stock of which $500 was issued for cash and $500 was issued upon conversion of long-term debt.
     
16.  p
     
     Entity A paid dividends of $200.
     
17.  q
     
     Entity A paid $100 from its restricted cash for workers' compensation claims accrued before January 1, 19X1. Before January 1, 19X1, Entity A's insurer required $225 to be set aside by a contractual arrangement for the payment of specific workers' compensation claims.

##### [230-10-55-21](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-21)

Pending content: no

Source downloaded (UTC): 2026-09-09T23:11:40.068Z to 2026-09-09T23:11:40.068Z

Record version: sha256:8e0e91eeed65d87af22866d9765ceed07a8095670aa7a3155c71f3ba274d6b93

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Based on the financial data from the preceding paragraphs, which illustrated the statement of cash flows prepared using the direct method, the following computations illustrate a method of indirectly determining cash received from customers and cash paid to suppliers and employees for use in a statement of cash flows under the direct method.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-50BFA529-672E-4BA0-B341-AFF4BFFAD8E2-low.gif)
    
    Cash received from customers during the year: Customer sales " $13,965 " Collection of installment payment for sale of inventory 100 Gross accounts receivable at beginning of year " $2,370 " Accounts receivable acquired in purchase of Entity B 155 Accounts receivable written off (350) Gross accounts receivable at end of year " (2,390)" Excess of new accounts receivable over collections from customers (215) Cash received from customers during the year " $13,850 " Cash paid to suppliers and employees during the year: Cost of sales " $10,290 " General and administrative expenses " $1,890 " Expenses not requiring cash outlay (provision for uncollectible accounts receivable) (200) Net expenses requiring cash payments " 1,690 " Inventory at beginning of year " (1,230)" Inventory acquired in purchase of Entity B (350) Inventory at end of year " 1,375 " Net decrease in inventory from Entity A's operations (205) Adjustments for changes in related accruals: Account balances at beginning of year Accounts payable and accrued expenses " $1,085 " Other liabilities 225 Prepaid expenses (110) Total " 1,200 " Accounts payable and accrued expenses acquired in purchase of Entity B 255 Account balances at end of year Accounts payable and accrued expenses " 1,090 " Other liabilities 275 Prepaid expenses (135) Total " (1,230)" Additional cash payments not included in expense 225 Cash paid to suppliers and employees during the year " $12,000 "