Exam 19: Statement of Cash Flows

George Corp.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section.Angela's activities for the year ended December 31,2016 included the following: • Declared a $12,000 cash dividend payable on January 15,2017. • Acquired an automobile costing $30,000 under a finance lease. • Declared and issued a stock dividend valued at $15,000. • Issued $330,000 in ordinary shares. • Accounts payable increased $18,000 during the year. • Paid $980,000 to repurchase bonds.The book value of the bonds was $1,010,000. • Made a $15,000 principal payment on a bank loan. • Interest expense for the period was $8,000.The interest payable account increased $2,000. Required: a.Prepare the cash flows from financing activities section of the statement of cash flows. b.Identify how the activities listed above that are not financing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Suzanne Inc.'s policy is to report all cash flows arising from interest and dividends in the operating activities section.The activities for the year ended December 31,2018 included the following: • Interest revenue for the period was $12,000.The interest receivable account decreased $3,000. • Sold an available-for-sale investment for $10,000.The book value was $5,000. How much would be presented as cash flow from operating activities?

Which item will be presented on the "investing section" of the cash flow statement?

Which is not a purpose of the cash flow statement?

Which of the following is an investing activity?

Which statement is not correct?

What is included in "cash and cash equivalents"?

Reuse It Inc.'s (RII)policy is to report all cash flows arising from interest and dividends in the operating section.The company's activities for the year ended December 31,2016 included the following: • Comprehensive income totaled $468,000 including $88,000 in other comprehensive income. • Paid a cash dividend of $30,000 that was declared in 2015. • Interest expense for the year was $14,000; the opening and closing balances in the interest payable account were $28,000 and $19,000,respectively. • Accounts receivable increased $63,000 and accounts payable decreased $19,000 during the year. • RII paid $51,000 cash for equipment. • RII sold held-to-maturity investments for $36,000.The book value of the investment was $39,000. • Depreciation expense for the year totaled $9,000. • Suffered an impairment loss on patents of $1 0,000. • Declared and issued a 2-for-l stock split.There were 20,000 ordinary shares outstanding before the split with a collective market value of $3,000,000. Requirements: a.Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. b.Identify how the activities detailed above that are not operating activities would be reported in the statement of cash flows.

Which statement is correct?

Financial information for Fesone Inc.'s balance sheet for fiscal 2013 and 2014 follows: 2014 2013 Cash 32,300 350,000 Accounts receivable 1,670,000 1,800,000 Inventory 710,000 450,000 Investments - held for trading 350,000 0 Investments - held to maturity 150,000 0 Property plant and equipment 4,000,000 4,000,000 Accumulated depreciation (1,935,000) (1,660,000) Total Accounts payable 220,000 40,000 Bank loan 2,601,000 3,000,000 Bonds payable 595,300 590,000 Preferred shares 0 20,000 Common shares 473,000 350,000 Retained earnings 1,088,000 940,000 Total Additional information: 1.Preferred shares were converted to common shares during the year at their book value. 2.The face value of the bonds is $600,000; they pay a coupon rate of 6% per annum.The effective interest rate of interest is 7% per annum. 3.Net income was $205,000. 4.There was an ordinary stock dividend valued at $13,000 and cash dividends were also paid. 5.Interest expense for the year was $115,000.Income tax expense was $61,500. 6.Fesone arranged for a $425,000 bank loan to finance the purchase of the held-to-maturity investments. 7.Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities,respectively. 8.The held-for-trading investments are not cash equivalents. 9.Sales = 2,000,000; cost of goods sold = 300,000; and,sales and administration expenses = 1,043,500 Requirement: Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.

Discuss how the cash flow statement helps evaluate a company's quality of earnings.

Rusabh Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section.Rusabh's activities for the year ended December 31,2018 included the following: • Sold a held-for-trading investment for $16,000.The book value of this investment,which was not designated as a cash equivalent,was $13,000. • Purchased an available-for-sale investment for $51,000. • Borrowed $100,000 from the bank for investment purposes. • Sold equipment for $23,000 that originally cost $55,000.The net book value of this item at time of sale was $35,000. • Purchased inventory costing $84,000 for cash. • Received $8,000 in interest and 5,500 in dividends on sundry investments. • Acquired a forklift costing $32,000 under a finance lease. • Acquired land and buildings valued at $100,000 by issuing ordinary shares. • Bought $400,000 in bonds at a discount,paying $375,000 cash. Required: a.Prepare the cash flows from investing activities section of the statement of cash flows. b.Identify how the activities listed above that are not investing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

A company's activities for the year ended December 31,2016 included the following: • Declared and issued a stock dividend valued at $50,000. • Paid $975,000 to repurchase bonds.The book value of the bonds was $1,000,000. • Made a $20,000 principal payment on a bank loan. How much will be presented as cash flow from financing activities?

Which statement is correct?

Green Leaf 's activities for the year ended December 31,2016 included the following: • Comprehensive income totaled $538,000 including $88,000 in other comprehensive income. • Paid a cash dividend of $80,000 that was declared in 2015. • Interest expense for the year was $29,000; the opening and closing balances in the interest payable account were $26,000 and $17,000,respectively. • Accounts receivable increased $33,000 and accounts payable decreased $24,000 during the year. • The company paid $56,000 cash for equipment. • The company sold held-to-maturity investments for $26,000.The book value of the investment was $27,000. • Depreciation expense for the year totaled $19,000. • Suffered an impairment loss on patents of $10,000. • Declared and issued a 2-for-l stock split.There were 400,000 ordinary shares outstanding before the split with a collective market value of $100,000,000. Requirement: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method assuming that the company's policy is to report interest and dividends received as an investing activity and interest and dividends paid as a financing activity.

If a company has gaps between the change in cash and the net income for the year,

Boboto Inc.'s policy is to report all cash flows arising from interest and dividends in the operating section.Boboto's activities for the year ended December 31,2018 included the following: • Declared and issued a stock dividend valued at $50,000. • Paid $46,000 to repurchase ordinary shares and cancelled them.The book value was $33,000. • Accounts payable decreased $23,000 during the year. • Issued $1,500,000 in bonds.The cash proceeds were $1,410,000. • Interest expense for the period was $10,000.The interest payable account decreased $4,000. • Made a $75,000 principal payment on a bank loan. • Declared a $15,000 cash dividend payable on January 15,2019. Required: a.Prepare the cash flows from financing activities section of the statement of cash flows. b.Identify how the activities listed above that are not financing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

The opening balance in the computer account for Adara Corp for fiscal 2017 was $100,000; the closing balance was $107,000.The corresponding balances in the accumulated depreciation accounts were $63,000 and $67,500.During the year Adara scrapped a computer originally costing $13,000 having a remaining net book value of $3,500 and purchased a replacement machine for cash. Requirements: a.Prepare the underlying journal entries to record the foregoing transactions and record events stemming from the transactions (e.g.,the accrual of interest at year-end). b.For each entry identify the cash flow effects,if any,under both the direct and indirect methods of presentation and classify the cash flow according to its nature.

Which statement about "cash and cash equivalents" is correct?

The Company's activities for the year ended December 31,2018 included the following: • Income tax expense for the year was $30,000. • Sales for the year were $650,000. • Accounts payable decreased $10,000 in 2018. • Selling and administration expenses for the year totaled $200,000. • Accounts receivable increased $20,000 in 2018. • The Company's cost of goods sold in 2018 was $325,000. • The Company's inventory increased $15,000 during the year. • Depreciation expense for the year was $13,000. What is the cash payments under the direct method?