F7 - Cash Flow Statements Flashcards
On 5/1/Y2, a company granted 3,000 stock options to its president, vesting equally during the next 3 years. The fair value of the options was determined to be $27,000 on the date of the grant. How is this reported in the Statement of Cash Flows for 12/31/Y2?
$6,000 in Operating Activities
The $27,000 expense is recorded evenly over the 3 year vesting period. Granting date was May 1, Year 2.
So, 27,000/3 years = 9,000
9,000 x 8 months/12 = $6,000
$6,000 is the compensation expense for Year 2 and it’s added back to net income to determine cash flow from operations. There is no impact on financing or investing activities, and no supplementary disclosure is required.
A company sold merchandise to a significant customer in November of Year 1 and received cash of $5,000 and a note for $60,000, payable in 95 days. The note was paid when due. How is this reported on the Statement of Cash Flows for Year 2 under the indirect method?
$60,000 in Operating Activities
The $5,000 received for the sale of merchandise would have been recorded as revenue in Year 1 and flowed through to net income, NOT the cash flows statement for Year 2.
The $60,000 that was received in Year 2 would decrease Accounts Receivable, resulting in a positive inflow of 60,000 for operating activities
