5 Flashcards
How should the purchase of cash equivalents be reported in the statement of CF:
It should be reported as cash.
Required disclosures of a statement of CF under the direct method:
a. major classes of gross cash receipts and payments
b. amount of income taxes paid
c. reconciliation of net income to net cash flow from operation
In the statement of CF, what are considered investing activities?
Acquisitions and sales of long term assets or investment assets.
Supplemental information that should be disclosed in the statement of CF includes:
Conversion of debt to equity
Under IFRS, the statement of CF may report dividend payments in:
the operating section or financing section.
When the indirect method is used in preparing the statement of CF, supplemental disclosures of cash paid for:
interest and income taxes is required.
Cash payments made to reduce debt principal are properly recorded where in the statement of CF?
Financing activity section. Cash interest payments would be reported as a component of operating activities.
In the statement of CF (under the indirect method), a gain from the sale of used equipment for cash should be reported in:
Operating activities as a deduction from income.
Statement of CF (direct method) Operating Activities (formula):
Rev -Increase in receivables \+Decrease in receivables \+increased in unearned rev -decrease in unearned rec
Operating activities includes all accruals except interest bearing liabilities: (Notes, debt, bond, debenture, line credit, nogotiatiated, financing)
Cash paid to suppliers (direct method) formula:
COGS \+ Increase in inv -Decrease in inv - Increase in AP \+ Decrease in AP =Cash paid to suppliers
Salaries and wages exp
- Increase in wages payable
+ Decrease in wages payable
= Cash paid to EE’s
Other operating activity expenses (Direct method) formula:
Other operating exp -Decrease in prepaid exp \+Increase in prepaid exp \+Decrease in accrued liabilities -Increase in accrued liabilities
Operating CF’s definition:
Cash receipts and disbursements from transactions reported on the IS and CA and CL (excluding current notes payable and current portion on LTD, which are reported in the financing CF’s).
Investing Cash Flows definition:
Cash receipts and disbursements from non-current assets.
Financing cash flows definition:
Cash receipts and disbursements from debt (including non-current liabilities) and equity.
Cash flow statement indirect method formula:
NI Adjustments for non-cash activities such as ALL DEFERRALS of past operating cash receipts and disbursements (example; subtracting increases in inventory and prepaid expenses, All ACCRUALS, of expected future operating cash receipts and disbursements (example; subtracting increases in accounts receivable and adding increases in accounts payable and accrued expenses), all items that are in net income that DO NOT AFFECT operating cash receipts and disbursements (example: those that should be omitted altogether or categorized as investing and financing activities, such as adding depreciation and amortization and subtracting gains on sales of productive assets).
