Statement of cash flow

Question 1

Using the indirect method what are some examples of supplemental disclosure in a statement of cash flow?

Answer 1

1. Cash paid for interest
2. Income taxes paid.

Question 2

What is the primary purpose of a SOC?

Answer 2

Provide relevant information about the Company’s receipts and cash disbursements during a period.

Question 3

How are amortization of bond discounts and premium treated in the SOC under the indirect method?

Answer 3

Amortization of bond discounts and premium are classified under operating activities.
1. Amortization of bond discounts are added back
2. Amortization of bond premiums are subtracted

Question 4

How are dividends received and dividend paid classified in the SOC?

Answer 4

1. Dividend paid = Financing activities
2. Dividend received = Operating activities

Question 5

How are purchases of equipment with with a portion of cash and financing treated for the SOC.

Answer 5

1. The portion paid in cash is treated as investing activity
2. The financing portion is disclosed under supplementary information in the non-cash investing and financing sections. Payments made to the financing loan are later reported in the financing activities section.

Question 6

What are the type of transaction the financing activities section includes?

Answer 6

Transactions that involve long term liabilities and equity.
1. Proceeds from loans, notes, bonds.
2. Payment of loans, notes, bonds.
3. Issuing of common stock.