FAR 25 - STATEMENT OF CASH FLOWS Flashcards
How should a purchase of a 3-month U.S. Treasury bill be reported in the statement of cash flows?
It doesn’t get reported.
3 month Treasury Bill = Cash Equivalent.
Therefore, cash goes in, cash goes out; net effect is 0 and the transaction is not reported
if used equipment is sold at again, the carrying amount + the gain is shown as cash inflow from INVESTING. How would the tax attributable to the gain be shown?
Payments for income taxes are reported as operating outflows
what type of cash flow activity includes
- purchases and sales of ppe
- purchases and sales of investments (other than trading securities)
- loans made to others along with principal collections on those loans
these are cash flows from investing
what type of cash flow activity is issuance of commons stock and purchase of treasury stock?
these are cash flows from financing
Is a reconciliation of ending retained earnings to net cash flow from operations disclosed on the statement of cash flows when prepared under the direct method?
No
Disclosed:
- major classes of gross cash received and paid
- income taxes paid
- reconciliation of net income to cash flows from operating activities
what does unearned revenues represent?
unearned revenues = cash collected but not considered revenue for accrual
Are dividends received classified the same way between GAAP and IFRS?
No.
GAAP - Dividends received is an operating activity
IFRS - Dividends received is an investing activity
An “Increase in the investment carried under the equity method” indicates…
that the amount included in income was greater than the amount actually received.
Deduct this amount.
A “Decrease in the premium on bonds payable” is due to amortization indicating…
that interest expenses is lower than the cash amount paid.
Deduct this amount.
*journal entry
DR Interest Expense
DR Premium
CR Cash (cash out equals premium + interest, but we only want to include in net income the amount of interest paid)
An “increase in deferred income taxes payable” indicates…
that some of the income tax expense deducted was not paid.
Add this amount
Should cash flow per share be disclosed on the statement of cash flows prepared using the indirect method?
No.
under the direct cash flow method depreciation is ignored!!
Got it; noted.
Under GAAP, interest paid is an operating activity.
Under IFRS interest paid is….
Under IFRS, interest paid is either operating or financing
What type of expenses does bad debt get allocated to?
Bad debt gets allocated as a selling expense
**usually the question will also specifically state that a portion of depreciation has been allocated to selfing expense
