FAR-Cash Flow Statement

Question 1

Give a summary of what goes into the Operating Section of a Cash Flow Statement.

Answer 1

Involves the cash effects of transactions that enter into the determination of net income, such as cash receipts from sales of goods and services.

Question 2

Give a summary of what goes into the Investing Section of a Cash Flow Statement.

Answer 2

Generally involve long-term assets and include loans and the acquisition and disposal of investments and long-lived assets

Question 3

Give a summary of what goes into the Financing Section of a Cash Flow Statement.

Answer 3

Involve liability and stockholder’s equity items and include obtaining cash from creditors and repaying the amounts borrowed. Also obtaining capital from owners and providing them with a return on investment

Question 4

List the primary items in the Operating Section of a Cash Flow Statement.

Answer 4

Cash Receipts From
Sale of goods or services
Sale of trading securities*
Interest revenue
Dividend revenue

Cash payments for:
Inventory purchases
Wages and salaries
Taxes
Interest expense
Other expenses (e.g., utilities, rent)
Purchase of trading securities*

Question 5

List the primary items in the Investing Section of a Cash Flow Statement.

Answer 5

FIX THIS SLIDE

Cash receipts from:
Sale of plant assets
Sale of a business segment
Sale of nontrading securities
Collection of principal on loans

Cash payments for:
Purchase of plant assets
Purchase of nontrading securities
Making loans to other entities

Stice, Earl K.; Stice, James D. (2013-03-12). Intermediate Accounting (Page 5-7). Cengage Textbook. Kindle Edition.

Question 6

List the primary items in the Financing Section of a Cash Flow Statement.

Answer 6

Cash receipts from:
Issuance of stock
Borrowing (e.g., bonds, notes,
mortgages)

Cash payments for:
Cash dividends
Repayment of loans
Repurchase of stock (treasury stock)

Question 7

With the Direct Method (GAAP), what are the sections in the Operating Section of the Cash Flow Statement?

Answer 7

Cash collected from customers
Payments for purchases
Payments for selling expenses
Payments for G&A
Payments for Interest
Payments for Taxes

Question 8

Where on the cash flow statement would the collection of a note receivable appear?

Answer 8

In the investing section. The investing section includes cash receipts from the collection of principal on loans.

Question 9

When should a statement of cash flow be provided.

Answer 9

A business entity or NFP that provides a set of financial statements that reports both financial position and results of operations shall also provide a statement of cash flows for each period for which results of operations are provided.

ASC 230-10-15-3

Question 10

Do income taxes and interest paid only need to be disclosed in the Operating Section of the CFS?

Answer 10

If the indirect method is used, amounts of interest paid (net of amounts capitalized) and income taxes paid during the period shall be disclosed.

ASC 230-10-50-2

See Wiley Online Q25 (Supplemental Disclosures)

Question 11

How do the ammortization of a bond premium or discount affect the CFS?

Answer 11

Premium: Deduction from Net Income (Operating Section)

Discount: Additon to Net Income (Operating Section)

Question 12

What are the two categories of supplemental disclosure are associated with the statement of cash flows?

Answer 12

• Cash paid for interest and income taxes
• Noncash investing and financing activities

Question 13

What is the difference between how bank overdrafts are treated in GAAP cashflow statements, and IFRS cashflow statements?

Answer 13

GAAP: Goes into Financing

IFRS: Goes into operating

Question 14

What is the main difference between GAAP and IFRS financial statements?

Answer 14

The key difference is that GAAP usually used the indirect method while IFRS uses the direct method to prepare the Statement of Cash Flows

Question 15

With GASB, What are the FOUR sections of of the Proprietary Funds Statement of Cash Flows? And is in each section?

Answer 15

1. Operating Activities
2. Investing
3. Non-Capital Financing
4. Capital and Related Financing
5. Reconciliation of operating income using the indirect method

Operating
-Direct Method is Required (No Interest or Dividends Rec’d; Similar to IFRS)
Investing
-Include Interest and Dividends Rec’d; Similar to IFRS
Non-Capital Financing
-Includes interest expense on nonsecured loans
-Transfers, grants, subsidies, and property taxes rec’d
Capital and Related Financing
-Includes interest expense on secured loans
-Includes financed purchased and sales of capital assets

Question 16

In Non-Profit, what kind of cash flow activity are restricted and temporarily restricted assets?

Answer 16

An operating activity

Question 17

In Non-Profit, what kind of cash flow activity is a permanently restricted asset?

Answer 17

A financing activity

Question 18

In NPO, what goes into the financing portion of the Statement of Cash Flows?

Answer 18

Proceeds from restricted contributions
Other Fianancing Activities
Permanently restricted revenue
Money restricted for a LT purpose
*PMT of Bonds, etc
* Money restricted for acquisition of PP&E