CASH FLOW STATEMENT

Question 1

When preparing indirect cash flow statement where to account bond discount amortization

Answer 1

it has to be adjusted to operating activities, logic behind is net income must be adjusted for all income statement items for the items do not affect cash disbursement and cash receipts.
in this scnario interest expense is more than cash paid due to amortization of discount, so bond amortization must be added back to net income so the operating activities only show the cash paid for interest.

Question 2

how to treat down payment on purchase of asset and notes payable issued to buy asset

Answer 2

Only down payment to be consider as investing activity under cash flow while notes payable installments to be consider as part of financing activity as they are payment on a debt obligation.

Question 3

HOW TO ACCOUNT STOCKS ISSUED FOR EMPLOYEE COMPENSATION

Answer 3

IT WOULD BE RECORDED UNDER OPERATING ACTIVITIES. AS IT IS NON CASH EXPENSE SO WE HAVE TO REVERSE IT FROM THER.