300154 STATEMENT OF CASH FLOWS 1A5

Question 1

Green Co. had the following equity transactions at December 31:

Cash proceeds from sale of investment in Blue Co.
(carrying value $60,000) $75,000
Dividends received on Grey Co. stock 10,500
Common stock purchased from Brown Co. 38,000
What amount should Green recognize as net cash from investing activities in its statement of cash flows at December 31?

$37,000

$85,500

$47,500

$75,000

Answer 1

Cash proceeds from the sale of an investment are a cash inflow and cash paid to purchase stock is a cash outflow. Both are investing activities.

$75,000 - $38,000 = $37,000

Question 2

Cash Flow

Answer 2

Cash flow is the amount of net cash that was generated by an entity during an accounting period. It is the difference between total cash inflows and total cash outflows.

Question 3

Financial Statements

Answer 3

A financial statement is a structured representation of historical financial information, including related notes, intended to communicate an entity’s economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.

Financial statements ordinarily refer to a complete set of financial statements as determined by the requirements of the applicable financial reporting framework.

Question 4

Investing Activities

Answer 4

Investing activities is one of the three categories of cash flows in the statement of cash flows. The category includes all transactions related to the making or collecting of loans and the acquiring and disposing of debt; equity instruments (of other entities); property, plant, and equipment; or a business unit.

FASB ASC 230-10-20

Question 5

Statement of Cash Flows

Answer 5

The statement of cash flows is one of the required financial statements. Cash receipts and cash payments are classified into three categories:

1. Operating activities—all transactions and other events that are not investing or financing; generally include transactions that enter into the determination of net income. These include production and delivery of goods and services, interest and dividends received, and payment of interest.
2. Investing activities—all transactions related to the making or collecting of loans and the acquiring and disposing of debt, equity instruments, or property, plant, and equipment.
3. Financing activities—all transactions related to obtaining resources from owners and providing them with a return on, and a return of, their investment, and to obtaining and repaying debt.
   Separate disclosure of noncash investing and financing activities is also required. Examples of such activities include obtaining an asset by entering into a finance lease, by exchange for another asset, or by the issuance of stock or debt.

The statement of cash flows can be prepared using either the direct or the indirect method.

FASB ASC 230-10-45 and 10-55

In governmental accounting, cash flow statements are presented for proprietary funds and governmental entities engaged in business-type activities. The direct method must be used and there are four headings in the statement: cash flows from operating activities, from noncapital financing activities, from capital and related financing activities, and from investing activities. (GASB 2450)

Question 6

2115.09

Answer 6

Question 7

FASB ASC 230-10-45-11 to 45-13