Exam 8: Reporting and Analyzing Cash Flows

Investments must be within 6 months of their maturity dates to be classified as cash equivalents.

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.The cash received from the sale was $40,000.

Discuss the differences between operating,investing,and financing activities.

Investing activities include

Describe the format of the statement of cash flows.

Explain noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Financing activities include receiving dividends from investments in other companies.

A noncash investing transaction should be disclosed as a note to the statement of cash flows.

Cleverso Corporation's calendar year-end 2021 and 2020 balance sheets showed the following items: Prepare a statement of cash flows for calendar 2021 that follows the indirect method of calculating the net cash provided (or used)by operating activities.

Under the indirect method,an increase in income taxes payable is added to profit when preparing the operating section of the statement of cash flows.

Find the cash inflows from investing and financing activities using the data below assuming the company followed ASPE standards. Proceeds from issuance of common shares \ 180,000 Dividends received on investments 8,000 Cash proceeds from sale of equipment 89,000 Proceeds from bond issuance 200,000 Dividends paid to shareholders 3,000 Cash proceeds from sale of investments 43,000 Gain on the sale of a short term investment 4,000

Use Aplec Corp's income statement and balance sheet information to calculate the net cash provided by operating activities,using the: (a)Direct Method (b)Indirect Method Aplec Corp. Income Statement For the Year Ended December 31, 2021 Sales (all on credit) \ 70,000 Cost of goods sold 22,000 Gross profit from sales 48,000 Depreciation expense 1,400 Salaries and wages 10,500 Rent expense 2,200 Interest expense 680 14,780 Operating income 33,220 Gain on sale of equipment 4,000 Profit 37,220 Aplec Corp. Balance Sheet December 31, Cash 142,200 56,980 Accounts receivable 4,600 1,000 Merchandise inventory 11,200 14,200 Long-term investments 101,000 112,800 Equipment 254,000 200,000 Accumulated depreciation, equipment 39,756 28,356 473,244 356,624 Accounts payable 6,000 6,800 Salaries and wages payable 1,400 1,200 Bonds Payable 49,000 63,000 Common shares 196,000 100,000 Retained earnings 220,844 185,624 473,244 356,624

Non-cash investing and financing activities may be disclosed

If a company borrows money from a bank,the interest paid should be reported on the statement of cash flows as a(n):

Dispositions of non-current assets

Explain the value of the statement of cash flows in analyzing cash flows.

Under the indirect method,a decrease in accounts payable will be added to profit.

Information to prepare the statement of cash flows usually comes from (a)comparative balance sheets,(b)current income statements,and (c)additional information.

Investing activities include: (a)the purchase and sale of non-current assets,(b)lending and collecting on notes receivable,(c)the purchase and sale of investments other than cash equivalents.

The statement of cash flows only measures outflows of cash during a period.