FAR Own Flashcards 5
What are the disclosures for the statement of cashflows prepared under the direct method?
- major classes of gross cash receipts and gross cash payments
- Income taxes paid
- Reconciliation from Net Income to net cash flow from operations
Investing Activities Include…
acquisitions and sales of long-term assets or investment assets. (Change in non-current assets)
Financing Activities on the statement of CFS include…
obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed. Dividends PAID, not dividends declared, should be included as an outflow of cash from financing activities
What is one thing that needs to be disclosed in the supplemental information of the statement of CFs?
The conversion of debt to equity needs to be disclosed. The cash flows per share does not need to be disclosed
What are some items that need to be disclosed under the indirect method?
Interest paid, net of capitalized amount, income taxes paid,
What is the primary purpose of the statement of cash flows?
To provide relevant information about cash receipts and cash disbursements of an enterprise during an ACCOUNTING PERIOD (not a future period)
When calculating cash paid to suppliers, how do you handle increases and decreases in inventory and accounts payable?
Beg. COGS
+ increase in inventory (inflow of goods = outflow of cash)
- decrease in inventory (outflow of goods = inflow of cash)
- increase in AP (Borrowing money = inflow of cash)
+ decrease in AP (paying off balance = outflow of cash)
= CASH PAID to suppliers
If statement of CF’s, if equipment is sold at a gain, what amount is shown as a cash inflow in the investing section?
The carrying amount of the equipment + PLUS the gain
DR: Cash
DR: AD
CR: Equipment
CR: Gain
How do you treat interest and principal paid on a capital finance lease in the statement of Cashflows?
The principal would be a reduction in the financing section, the interest would be a reduction of interest paid in the operating section.
*cash payments made to reduce debt principal are properly reported as a financing activity. Cash interest payments would be reported as a component of cash from operating activities
Where do you report dividends paid on the statement of cashflows?
In the FINANCING activities (NOT OPERATING) because dividends paid reduces retained earnings not net income
Where do dividends received and dividends paid go on the statement of cashflows
Dividends received go in the operating section as inflow
Dividends paid go on the financing section as an outflow
What is accounts receivable turnover in days
(average net accounts receivable)/(Net credit sales/365)
What effect does depreciation have on the direct method of the statement of cashflows?
NO EFFECT, it is added to net income under the INDIRECT method, but under the direct method, the amount itself is not a component of cash flow from operating.
What effect do gains and losses have on the direct method of the statement of cashflows?
NO EFFECT, gains and losses are not included in the calculation of operating cash flow under the direct method. They are only subtracted and added from net income in the indirect method
What goes into the calculation of cash received from customers?
Sales Revenue, change in AR, AND change in DEFERRED REVENUE!!
