Exam 9: Statement of Cash Flows

What is an investing activity?

Why are "cash and cash equivalents" treated as a single unit on the cash flow statement?

Green Leaf's activities for the year ended December 31,2018 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 2017. • 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. 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 received and paid and dividends paid as an operations activity

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 net cash payments to suppliers under the direct method?

Financial information for Flagstone Inc.'s balance sheet for fiscal 2018 and 2017 follows: Additional information: 1.Preferred shares were converted to common shares during the year at their book value. 2.The recorded increase in the bonds payable account was due to the amortization of the discount. 3.Net income was $318,000. 4.There was a common stock dividend valued at $20,000 and cash dividends were also paid. 5.Interest expense for the year was $95,000.Income tax expense was $57,000. 6.Flagstone arranged for a $500,000 bank loan to finance the purchase of the equipment. 7.Flagstone 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 = 1,900,000; cost of goods sold = 450,000; and,sales and administration expenses = 980,000 (includes depreciation expense) Required: Prepare a statement of cash flows for the year ended December 31,2018 using the indirect method.

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.

On January 1,2017,Adara acquired equipment under a finance lease.The lease calls for fifteen annual payments of $10,000 due at the beginning of the year.Adara must return the equipment to the lessor at the end of the lease.The January 1,2017 payment was made as agreed.The implicit rate in the lease is 7%; the present value of the lease payments is $97,455. Required: a.Prepare the underlying journal entries to record the foregoing transactions and record events stemming from the transactions (e.g.,depreciation and 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.

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.

Which of the following is a financing activity?

The following is an excerpt from a company's financial records at year-end. The "cash and cash equivalents" in the cash flow statement will be:

How do companies account for allowance for doubtful accounts on the cash flow statement?

What is not a "non-cash" transaction?

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.

Which statement is correct according to IAS 7?

Which statement is correct?

Provide a summary of presentation and disclosure requirements relating to the statement of cash flows.

Which is a correct statement?

Tub Time Corp.'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 31,2018 included the following: • 2018's net income after taxes totaled $220,000. • Declared and issued a stock dividend valued at $40,000. • Accounts receivable decreased $44,000 in 2018. • Sold a held-for-trading investment for $13,000.The book value was $11,000.(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 2018. • Sold an available-for-sale investment for $9,000.The book value was $14,000. • Tub Time recorded a $15,000 goodwill impairment loss during the year. • Depreciation expense for the year 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.

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.

Financial information for Fesone Inc.'s balance sheet for fiscal 2018 and 2017 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 $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 Required: a.Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. b.Explain the difference between the direct method and the indirect method.