Statement Of Cash Flows

Question 0

Under indirect method of SCF, what is the treatment of bond discount?

Answer 0

Any discount amortization is added back to the net income each period.

Question 1

Is premium on bonds, a financing Activity?

Answer 1

Yes, because the cash payments cover the interest expense and the remainder of each payment (the premium amortization) goes toward paying a portion of the amount borrowed.

Question 2

Under indirect method of SCF, what is the treatment of bond premium?

Answer 2

No effect. Net income is not adjusted for bond premium as it is done for bond discount.

Question 3

Under direct method of SCF, what’s the treatment of non cash items?

Answer 3

Non cash items such as Depreciation Expense, gains, and losses are not reported.

Question 4

Where are “trading securities” listed on SCF?

Answer 4

In the operating activities.

Question 5

Just remember this!

Answer 5

When doing questions involving cash receipts from customers, if the AFDA beginning and ending balances are given but not specifically mentioned in the question that A/R was written-off then don’t add or subtract the diff to adjust the net cash. It is just there to trick us. See question in bullet 2 under SCF topic. Question number is AICPA.921109FAR-P1-FA

Question 6

Remember this about expenses and SCF.

Answer 6

There’s no such thing as beginning insurance expense because all temporary accounts close at the end of accounting period. Don’t fall victim to this trick when doing SCF questions. Ref. question # AICPA.901117FAR-P2-FA