CH 11 Accounting Cash Flow

Question 1

do inventories belong to the statement of operating activities

Answer 1

Yes

Question 2

How are inventories recorded?

Answer 2

(inc.) Dec. In inventory

Question 3

Examples of inventory

Answer 3

Examples of inventory that a manufacturing business may have include: raw materials, such as wood, to make a shelf. work-in-process inventory, such as an unfinished cake in a food manufacturing business. finished goods inventory, such as a bed you’ve finished making.

Question 4

Examples of office supplies

Answer 4

Office supplies include copy paper, toner cartridges, business forms, pens, pencils, stamp pads, letter envelopes and other desk supplies.

Question 5

Where is equipment, in which cash flow?

Answer 5

In investing activities.
The cash flow from investing shows the cash used to purchase fixed and long-term assets, such as plant, property, and equipment (PPE), and also any proceeds from the sale of these assets.

Question 6

Treasury Stock, in which cash flow?

Answer 6

The purchase of Treasury Stock will cause a decrease in cash from financing activities. The purchase of treasury stock results in a decrease in stockholders’ equity. Changes in stockholders’ equity and long-term liabilities are shown in the financing activities section of the statement of cash flows.

Question 7

Are taxes calculated in operating cash flow?

Answer 7

Yes, taxes are included in the calculations for the operating cash flow

Question 8

Is there a direct and indirect method for financing and investing activities?

Answer 8

There is only a direct method for financing and investing activities.
The indirect method and direct method can both be used for operating cash flow.

Question 9

What has to be listed for the direct method in operating activities?

Answer 9

Major categories of operating cash receipts:
- Cash receipts (collections) from customers
- Interest and dividends received 
Major categories of cash disbursements:
- Payment to suppliers
- Payment  to employees
- Payment of Interest
- Payment of income tax
- Payment of operating expenses

Question 10

cash equivalents

Answer 10

Highly liquid short-term investments that can be converted into cash immediately

Question 11

cash flows

Answer 11

cash receipts and cash payments (disbursements)

Question 12

cash realization ratio

Answer 12

an entity’s ability to generate cash from net or operating profit. Calculated as cash flows from operations divided by net profit.

Question 13

free cash flow

Answer 13

The amount of cash available from operations after paying for capital expenditures such as investments in PPE.

Question 14

indirect method

Answer 14

Format of the operating activities section of the statement of cash flows.
Starts with net income and reconciles to cash flows from operating activities.

Question 15

investing activities

Answer 15

Activities that increase or decrease the long-term assets available to the business

Question 16

Put on Paper flash card

Answer 16

Cash Flows from Operating Activities:

Net Income
1. + Non-Cash Expenses:
(Depreciation, Depletion & Amortization Expense)

2. • Non-Operating Losses:
     (Loss on Sale of Non-Current Assets)
     − Non-Operating Gains:
     (Gain on Sale of Non-Current Assets)
3. • The decrease in Current Assets other than cash or cash equivalents:
     (Accounts Receivable, Prepaid Expenses, Inventory, etc.)
     − Increase in Current Assets other than cash or cash equivalents
4. • The increase in Current Liabilities:
     (Accounts Payable, Accrued Liabilities, Income Tax Payable etc.)
     − Decrease in Current Liabilities

= Net Cash Flow from Operating Activities

Question 17

What are non-operating losses or gains?

Answer 17

Losses or gains on sale of non-current assets

Question 18

What are current assets?

Answer 18

Accounts Receivables, Prepaid Expenses, Inventory, etc.

Question 19

What are current liabilities?

Answer 19

Accounts Payable, Accrued Liabilities, Income Tax Payable

Question 20

What are current liabilities?

Answer 20

Accounts Payable, Accrued Liabilities, Income Tax Payable

Question 21

What is equipment?

Answer 21

Equipment is a non-current or long-term asset account which reports the cost of the equipment.

It is listed in the investing activities.