Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

FAR- F7 > Statement of cash flows > Flashcards

Statement of cash flows Flashcards

1
Q

How are T Bills treated on the statement of cash flows?

A

U.S. Treasury bills are not considered to be a cash equivalent item so purchasing the T-bill merely changes the form of cash held, it does not change the cash poisition of the entity.

This, the purchase is not reported on the statement of cash flows.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the required disclosures under the direct method under U.S. GAAP?

A
  • The major classes of gross cash receipts and gross cash payments.
  • The amount of income taxes paid.
  • A reconciliation of net income to net cash flows from operations.

The reconcilation of retained earnings to net cash flows is NOT required.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Cash flows from operating activities

(CFO)

A
  • Selling products/collecting receivables
  • Purchasing inventory/paying vendors
  • Purchsing supplies and services/paying vendors
  • Paying taxes
  • Purchasing/selling trading secuirites
  • Collecting interest on an investment
  • Collecing dividends on an investment
  • Paying interest on debt
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Cash flows from Investing activities

(CFI)

A
  • Purchasing long-term assets or long-term investments for cash
  • Selling long-term assets or investments (noncash equivalents and non-trading securities) - cash proceeds
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Cash flow from financing activities

(CFF)

A
  • Borrowing funds (i.e, bank loans, issuing debt)
  • Paying principal on debt
  • Issuing common or preferred stock
  • Paying dividends on common or preferred stock (not declared)
  • Repurchsing stock
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Which shold be disclosed as **supplemental information **in the statement of cash flows?

Cash flow per share?

Conversion of debt to equity?

A

Cash flow per share- NO

Conversion of debt to equity- YES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Disclosures using indirect method

A

Financial statements should not report an amount of cash flow per share.

​Things that should

  • Interest paid, net of amounts capitalized
  • Income taxes paid
  • Dividends paid on preferred stock
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Redemption of bonds payable formula

A

Beginning balance (end of year 1)

Add: Issuance of bonds for whatever

Subtotal

less: (redemption of bonds payable) plug

Ending balance (end of year 2)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Operating activities (indirect method)

Current asset increase?

Current asset decrease?

Current liabilities increase?

Current liabilities decrease?

A
  • Current asset increase: subtract
  • Current asset decrease: add
  • Current liabilities increase: add
  • Current Liablities decrease: subtract
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Operating activities summary

A
  1. Cash received from customers
  2. Cash paid to suppliers and employees
  3. Interest receiced and interest paid
  4. Dividends received
  5. Purchases and sales of trading securities (if appropirate)
  6. Income taxes paid
  7. All other cash transactions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Operating activities (indirect method)

A
  1. Record net income
  2. Adjust net income for noncash items such as deprecation and the impairment of goodwill
  3. Reverse the income statement gain or loss shown on the sale of any asset
  4. Adjust for changes in current assets and current liablities except for cash accounts andn accounts treated elsewhere in the statement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Financing activities (direct and indirect methods)

A
  1. All sums borrowed and/or repaid (principal amount only)
  2. Issuance and/or repurchse of own company stock
  3. Dividends paid (not received)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Investing activities (direct and indriect methods)

A
  1. All sums lent and/or repaid (principal only).
  2. Purchase and/or sale of noncurrent assets (including fixed assets, intangible assets, and marketable securities).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Cash payments made to reduce debt prinicpal are properly reported as a financing activitiy.

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Cash inflows and outflows should be seperated.

A

If a gain is made and then subesequently a purchase is made, you would split them up as a cash inflow and a cash outlfow.

17
Q

When asking for net income, and it gives you:

Cash provided from operating activities

Deprecation of equipment

Impariment of goodwill

Dividends paid on common stock

What do you do?

A

Cash provided from operating activities

(Deprecation on equipment) expense

(Imapirment of goodwill) expense

Net income

Dividends effects retained earnings.

18
Q

Cash provided by operating activities. Where do you start?

A

Net income

then any adjustments in the operating section

19
Q

Where is unamoritized bond discount located?

A

In the operating activities section

20
Q

What is the only marketable security included in the operating section?

A

Trading

Available for sale and marketable are in investing.

21
Q

Where are income taxes paid and net interst payments reported on the statement of cash flows?

A

The supplemental disclosures.

22
Q

Under IFRS interest received during a period is reported on the statement of cash flows where?

A

in the Operating and investing section

23
Q

Under IFRS, interest paid during a period is reported where?

A

In the operating or financing section

24
Q

Where is payment of interest located on the statement of cash flows?

A

In the operating section.

Principal is located in the financing section

25
Q

When doing these illogical cash flow quesitons, ignore stupid things like “cash paid to suppliers for inventory purchases.”

A

So if it gives you an inrcrease in a current asset (inventory) and a decrease in a current liablity (A/P), just treat it as your adjustments to current assets/liabilities.

26
Q

If equipment is sold at a gain, what cash inflow is showed and where?

A

Carrying amount of the equipment

+

The gain

27
Q

When something like new equiment is bought, what is showed as a cash outflow

A

The Cash paid for the new equipment.

Remember, this is the statment of cash flows, so we are not worrying about the note payable, it is not a CASH outflow.

28
Q

You have to think opposite when looking for net income on the statement of cash flows.

A

Instead of starting with net income and adding things like deprecation expense and impairment of goodwill, you have to start at operating activities and subtract these things to get net income.

29
Q

Income related acitivites are all automatically what kind of cash flow?

A
30
Q

When unarmotized bond discount is decreased $xxx by the year, what the fuck does that mean dumbass?

A

It means it was amortized at the end of the year.

Use your fucking head.

31
Q

The operating activities section includes what itmes?

A
  • Current assets and current liabilities
  • Other income statement items.

Under the indirect method, net income is adjusted by obvious things to get to net cash.

32
Q

Indirect method, how are the follwing accounts treated in the operating section?

Increase in taxes payable

Dividends received

A

Increase in taxes payable- subtract

Dividends received- NOT INCLUDED IN INDIRECT METHOD

Remember indirect method is income statment items plus changes in current assets and liablities.

33
Q

When figuring out operating expense when they give you the accounts that increase in decrease, you have to think of it differently.

A

Example.

  • **Increase in prepaid expenses- **Expenses which have been paid but not yet used, therefore it must be added.
  • **Increase in accured liabilities- **Operating expenseswhich have been incurred or used but not paid, therefore they must be subtracted.
34
Q

Financing section-

What does the borrowings under a line of credit mean?

A

It represents an increase in cash flows

35
Q

Tax related to the gain is located where?

A

In the operating section of cash flows.

36
Q

Cash paid to supplies forumula

DIRECT METHOD

A

COGS

Add: Increase in inventory

less: (Decrease in inventory)
less: (increase in accounts payable)

Add: Decrease in accounts payable

Cash paid to suppliers

FAR- F7 (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions