F7 Cash Flows

Question 1

The statement of cash flows is composed of three sections:

Answer 1

Cash flows from Operating Activities (CFO), Cash Flows from Investing Activities (CFI), and Cash Flows from Financing Activities (CFF)

Question 2

Cash Flows from Operating Activities (CFO)-

Answer 2

Cash receipts and disbursements from transactions reported on the income statement and current assets and liabilities. Cash flows related to current notes payable and the current portion of long-term debt are reported as financing cash flows

Question 3

Cash Flows from Investing Activities (CFI)-

Answer 3

Cash receipts and disbursements from non-current assets

Question 4

Cash Flows from Financing Activities (CFF)-

Answer 4

Cash receipts and disbursements from debt (including non-current liabilities) and equity

Question 5

Cash Equivalents (treated as cash) are

Answer 5

debt securities with an ORIGINAL maturity date of three months or less

Question 6

Under the INDIRECT METHOD

Answer 6

operating activities section adjusts net income to cash provided, or used, by operating activities.
Various Adjustments:
C
L
A
D
When the indirect method is used, a supplemental disclosure of cash paid for interest and income taxes is required.

Question 7

Under the DIRECT METHOD

Answer 7

operating activities section shows the major classes of cash receipts and disbursements in their gross amounts to arrive at net cash provided by (used in) operating activities.
When the direct method is used, a supplemental disclosure entitled the reconciliation of net income to cash provided by operating activities is required under U.S. GAAP, but is not required under IFRS.

Question 8

Both DIRECT and INDIRECT methods…

Answer 8

a disclosure of noncash investing and financing activities is required

Question 9

Interest and Dividends received are classified as…

Answer 9

CFO under U.S. GAAP

CFO or CFI under IFRS

Question 10

Interest and Dividends paid are classified as…

Answer 10

CFO or CFF under IFRS

Interest paid is CFO under U.S. GAAP
Dividends paid are CFF under U.S. GAAP