Cash Flows

Question 1

What receipts and payments should be used in reporting cash flows from operating activities using the direct method?

Answer 1

1. cash collected from customers
2. interest and dividends received
3. other operating cash receipts
4. cash paid to employees and other suppliers of goods and services
5. interest paid
6. income taxes paid
7. other operating cash payments

Question 2

What is included in the financing activities section of the statement of cash flows?

Answer 2

Financing activities are associated with a company’s liabilities and stockholders’ equity.

It includes the cash effects of transactions obtaining resources from owners and providing them with a return on their investment.

Question 3

What kind of activity in the statement of cash flows is acquiring a $30,000 fixed asset with $3,000 down and financing $27,000 for the remainder?

Answer 3

Operating - None

Investing - outflow of $3,000

Financing - Inflow $27,000 asset difference
Financing - Outflow - Principal payments for financed amount