ch13 guidlines

Question 1

the set of financial statements

Answer 1

1) income statement
2) balance sheet
3) statement of stockholders’ equity
4) statement of cash flows

Question 2

“cash” defined for the statement of cash flows

Answer 2

the statement of cash flows usually explains changes in both cash and cash equivalents. Cash and cash equivalents include:

• petty cash
• checking and savings account deposits
• money markets
• short-term certificates of deposit
• U.S. treasury bills

Question 3

cash flows in the statement of cash flows

Answer 3

1. Cash flows from operating activities
2. Cash flows from investing activities
3. Cash flows from financing activities

Question 4

info need to prepare the statement of cash flows

Answer 4

1. income statement for the year
2. balance sheets for the current and prior year (comparative balance sheets)
3. additional information about investing and financing activities that occurred during the year

Question 5

adjustments used for the indirect method when reconciling net income to the cash basis

Answer 5

1. all noncash expenses are added back to net income
2. all noncash revenues are deducted from net income
3. all charges in current asset and current liability accounts will either be added, or deducted from net income

Question 6

how to reconcile net income to the cash basis for current assets accounts

Answer 6

• if current asset account increases, then subtract the change from net income
• if current asset account decreases, then add the change to net income

Question 7

how to reconcile net income to the cash basis for current liability accounts

Answer 7

• if current liability account increases, then add the change to net income
• if current liability account decreases, then subtract the change from net income