F7-Statement of Cash Flows

Question 1

What are the three sections of the statement of cash flows? What cash flows are included in each section?

F7-21

Answer 1

• Operating activities– Cash flows from income statement transactions and current assets/liabilities.
• Investing activites- Cash flows from noncurrent assets.
• Financing activites– Cash flows from debt and equity.

Question 2

Define Cash *Equivalents. *

F-7-22

Answer 2

• Cash Equivalents*: Cash equivalents are higly liquid investments with maturities of three months or less than are readily convertible into cash with insignificant risk of changes in value.
• Note: “*Maturities of three months or less” is of original instrument or from purchase date of instrument.

Question 3

Name the two methods of presentation of cash flows from operating activities.

Which method is preferred?

F7-23

Answer 3

• Direct and indirect methods.
• Direct method is preferred.

Question 4

If using the direct method of presenting cash flows from operating activities, what additional item needs to be included in the statement of cash flows under U.S. GAAP?

F7-24

Answer 4

• A reconciliation of net income to net cash provided by operations needs to be provided as a supplemental schedule. (Not required under IFRS).

Question 5

Name the common adjustments made to cash flows from operating activities using the indirect method.

CLAD

F7-25

Answer 5

Current assets and liabilities.

Losses and gains.

Amortization and depreciation.

Deferred items.

Question 6

Name the most common classes of cash receipts and disbursements included in cash flows from operating activities using the direct method.

F-26

Answer 6

• Cash received from customers.
• Cash paid to suppliers and employees.
• Interest received and paid.
• Dividends received.
• Purchases and sales and trading securities, if appropriate, based on the nature and purpose for which the securities were acquired.
• Income tax paid.

Question 7

Name items that are usually categorized as financing activities?

F-26A

Answer 7

Cash Flow from debt and equity transactions.

• All sums borrowed and repaid (principal only).
• Issuance and repurchase of own company stock.
• Dividends paid (not received)

Question 8

Name items that are usually categorized as *investing activities. *

MAAP out my investing activities for me.

F-26B

Answer 8

Cash flows from noncurrent asset transactions:

• Making or collecting loans.
• Acquiring or disposing of property, plant, and equipment.
• Applicable extraordinary and non-operating items.
• Purchasing or disposing of investment securities or other entities, including trading securities (if appropriate, based on the nature and purpose for which the securities were acquired), available-for-sale securities and held-to-maturity securities.

Question 9

Name the most common classes of cash receipts and disbursements included in cash flows from operating activities using the direct method.

F-26C

Answer 9

• Cash received from customers.
• Cash paid to suppliers and employees.
• Interest received and paid.
• Dividends received.
• Purchases and sales of trading securities, if appropriate, based on the nature and purpose for which the securities were acquired.
• Income taxes paid.

Question 10

Name items that are usually categorized as financing activities?

F-26A

Answer 10

Cash Flow from debt and equity transactions.

• All sums borrowed and repaid (principal only).
• Issuance and repurchase of own company stock.
• Dividends paid (not received)

Question 11

Name items that are usually categorized as *investing activities. *

MAAP out my investing activities for me.

F-26B

Answer 11

Cash flows from noncurrent asset transactions:

• Making or collecting loans.
• Acquiring or disposing of property, plant, and equipment.
• Applicable extraordinary and non-operating items.
• Purchasing or disposing of investment securities or other entities, including trading securities (if appropriate, based on the nature and purpose for which the securities were acquired), available-for-sale securities and held-to-maturity securities.

Question 12

Name the most common classes of cash receipts and disbursements included in cash flows from operating activities using the direct method.

F-26C

Answer 12

• Cash received from customers.
• Cash paid to suppliers and employees.
• Interest received and paid.
• Dividends received.
• Purchases and sales of trading securities, if appropriate, based on the nature and purpose for which the securities were acquired.
• Income taxes paid.