Cash Flows

Question 1

Direct method of operating activities

Answer 1

Cash receipts from: net cash inflows
Cash disbursements for: net cash outflows

= Net cash provided by operating activities

Question 2

Indirect method of operating activities: Additions

Answer 2

1. decrease in receivables
2. decrease in inventories
3. increase in payables
4. depreciation expense
5. amortization of bond discount
6. loss on sale of plant assets
7. loss on investment in equity method investees

Question 3

Indirect method of operation activities: Subtractions

Answer 3

1. increase in receivables
2. increase in inventories
3. decrease in payables
4. amortization of bond premium
5. gain on sale of plant assets
6. income from investment in equity method investees

Question 4

Investing activities

Answer 4

Transactions of long lived assets :

1. purchase and sale of securities of other entities
2. purchase and sale of PPE
3. granting and repayment of principal on loans made to other entities

Question 5

Financing activities

Answer 5

Transactions involving liabilities and owners equity

1. cash receipts from sale of bonds and issuance of stock
2. cash payments to bondholders for the retirement of debt and to stockholders as dividends

Question 6

Included in Cash Flows Statement but no effect on cash flow

Answer 6

1. conversions of debt to equity
2. assets obtained by assuming liabilities or entering into lease agreements
3. capital assets received as gifts
4. exchange of a non-cash asset or liability for another