FAR - Statement of Cashflow

Question 1

What are the three categories of cash flows?

Answer 1

1. Operating
2. Investing
3. Financing

Question 2

What element is specifically prohibited from being disclosed in the Statement of Cashflow unless it is based on contractual amounts?

Answer 2

Cash flow per share.

Question 3

Where does the conversion of debt to equity appear in the financials as it relates to cash flows?

Answer 3

Supplemental noncash disclosure schedule.

Question 4

What is the primary purpose of the Statement of Cashflows?

Answer 4

To depict the major cash receipts and disbursements during a period.

Question 5

What affect does the purchase of a 3-month US Treasury bill on the Statement of Cash Flows?

Answer 5

No affect and not reported. The result is an outflow of cash and an increase in cash equivalents.

Question 6

Noncash investing & financing activities can be disclosed in one of the following ways:

Answer 6

1. On the face of the statement of cash.
2. In a supplemental schedule.
3. In the footnotes.

Question 7

What is the formula to determine working capital?

Answer 7

Current Assets - Current Liabilities

Question 8

Which statement of cash flow preparation method uses the reconciliation of net income (accrual basis) to cash generated by operations (cash basis).

Answer 8

The indirect method of presenting cash flow from operating activities. Starts with Net Income and coverts to cash.

Question 9

During 20X1, Teb, Inc. had the following activities related to its financial operations:
Payment for the early retirement of long-term bonds payable (carrying value $740,000) $750,000
Distribution in 20X1 of cash dividends declared in 20X0 to preferred shareholders 62,000
Carrying value of convertible preferred stock in Teb, converted into common shares 120,000
Proceeds from the sale of treasury stock (carrying value at cost, $86,000) 95,000
In Teb’s 20X1 Statement of Cash Flows, net cash used in financing activities should be:

Answer 9

Payment for the early retirement of long-term bonds payable ($750,000)
Distribution in 20X1 of cash dividend declared in 20X0 to preferred shareholders (62,000)
Proceeds from the sale of treasury stock 95,000
Net cash used in financing activities ($717,000)

The conversion of preferred stock is a non-cash activity, not a cash flow.