Exam 19: Statement of Cash Flows

Crete Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section.Crete's activities for the year ended December 31,2018 included the following: ∙ Income tax expense for the year was $30,000. ∙ Sold an available-for-sale investment for $45,000.The book value was $52,000. ∙ Depreciation expense for the year was $19,000 ∙ Sales for the year were $1,030,000. ∙ Selling and administration expenses for the year totaled $240,000. ∙ Mamie's cost of goods sold in 2018 was $315,000. ∙ Interest expense for the period was $12,000.The interest payable account increased $5,000. ∙ Accounts payable increased $20,000 in 2018. ∙ Accounts receivable decreased $36,000 in 2018. ∙ Mamie's inventory increased $13,000 during the year. ∙ Dividends were not declared during the year;however,the dividends payable account decreased $5,000. Required: a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. b.Identify how the activities listed above that are not operating activities would be reported in the statement of cash flows.

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

How is other comprehensive income (OCI)shown on the Statement of Cash Flows (SCF)?

What are investing activities?

Which statement is correct?

Investing involves buying and selling debt and equity securities.What two categories of investing do not appear in the investing section of the cash flow statement?

Reuse It Inc.'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. Required: 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.

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

Financial information for Fesone Inc.'s balance sheet for fiscal 2017 and 2018 follows: 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 $200,000;they pay a coupon rate of 6% per annum.The effective interest rate of interest is 8% per annum. 3.Net income was $290,000. 4.There was an ordinary stock dividend valued at $12,000 and cash dividends were also paid. 5.Interest expense for the year was $130,000.Income tax expense was $116,000. 6.Fesone arranged for a $200,000 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.Assume that Fesone designates the held-for-trading investment as a cash equivalent. Required: a.Prepare a statement of cash flows for the year ended December 31,2018 using the indirect method. b.Discuss how the transaction(s)above that are not reported on the statement of cash flows are reported in the financial statements.

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 31,2018 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 2017. ∙ 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. Required: 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.

A company's activities for the year ended December 31,2018 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?

To provide information useful to decision makers,IAS 1 requires companies to report cash inflows and outflows using standardized categories.Which one of the following is not one of these standardized categories?

What is included in "cash and cash equivalents"?

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. Required: a.Prepare the underlying journal entries to record the foregoing transactions and record events stemming from the transactions. 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.

Mamie K.Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section.Mamie's activities for the year ended December 31,2018 included the following: ∙ Income tax expense for the year was $36,000. ∙ Sales for the year were $730,000. ∙ Accounts payable decreased $20,000 in 2018. ∙ Selling and administration expenses for the year totaled $140,000. ∙ Accounts receivable increased $6,000 in 2018. ∙ Mamie's cost of goods sold in 2018 was $315,000. ∙ Mamie's inventory decreased $13,000 during the year. ∙ Interest expense for the period was $17,000.The interest payable account increased $5,000. ∙ Dividends were not declared during the year;however,the dividends payable account decreased $2,000. ∙ Sold an available-for-sale investment for $45,000.The book value was $52,000. ∙ Depreciation expense for the year was $19,000. Required: a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. b.Identify how the activities listed above that are not operating activities would be reported in the statement of cash flows.

Select transactions of Irene Accounting Inc.(IAI)are listed below.IAI uses the indirect method to determine cash flows from operating activities. 1.IAI sells a held-to-maturity investment for $28,000.The investment's amortized cost is $20,000. 2.IAI's income tax expense totaled $30,000.Its income tax payable account increased $5,000,while its deferred income tax liability account decreased $18,000. 3.IAI declares a cash dividend of $3,000.The dividends payable account increases $1,000. 4.At year-end IAI increases its allowance for bad debts by $15,000. Required: Discuss how the activities listed above would be reported in the statement of cash flows.For items with multiple reporting options,identify all available options.For items not reported on the statement of cash flows,indicate the disclosure requirements,if any.

ABC Inc.'s policy is to report all cash flows arising from interest and dividends in the operating activities section.Tub Time's activities for the year ended December 31,2017 included the following: ∙ Net income after taxes totaled $400,000. ∙ The company recorded a $4000 goodwill impairment loss during the year. ∙ Depreciation expense for the year was $24,000. ∙ Declared and issued a stock dividend valued at $10,000. ∙ Accounts receivable increased $33,000 in the year. ∙ Sold a held-for-trading investment for $23,000.The book value was $18,000.(Assume this held-for-trading investment was not designated as a cash equivalent. ) ∙ Interest revenue for the period was $6,000.The interest receivable account decreased $4,000. ∙ Declared a $10,000 dividend payable.The dividends payable account decreased $19,000 in the year. ∙ Sold an available-for-sale investment for $19,000.The book value was $14,000. Required: a.Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. b.Identify how the activities listed above that are not operating activities would be required in the statement of cash flows.

What is not a "non-cash" transaction?

What are the two distinct components to investing activities?

Prepare the Statement of Cash Flows for Renoir Art Gallery Ltd for the year ended December 31,2018 using the indirect method from the following income statement,comparative balance sheets and supplemental information: Supplemental information: - The decrease in bonds payable is due entirely to the amortization of the related premium. - Renoir's policy is to report interest and dividends paid as a cash outflow from operating activities. - The held-for-trading investments do not meet the criteria for cash equivalents. - $10,000 of held-for-trading investments were purchased during the year;none were sold. • Property,plant,and equipment costing $670,000 was sold for $422,000. • 100,000 ordinary shares (valued at $550,000)were exchanged as part of the acquisition cost of new property,plant,and equipment.The balance was paid in cash. • The $212,000 cost of successfully suing a competitor for patent infringement was capitalized during the year. • "Other Expenses" includes gains and losses on asset sales,holding losses,and patent amortization. • Cash was received or paid for all revenues and expenses other than those relating to inventories,sales,depreciation,and amortization. • Income from discontinued operations represents the operating profits of a plant that is in the process of being decommissioned.The recorded profit was received in cash. Required: 1.Prepare Renoir's statement of cash flows for the year ended December 31,2015 using the indirect method,including disclosure of non-cash activities.