Statement of Cash Flows

Question 1

Investing Activities

Answer 1

• Asset transactions other than cash
• Debt instruments purchased by enterprise, payments of those loans
• Cash payments and sales from equity instruments of other enterprises
• Purchase of another entity’s stock, as this would become a fixed asset for the company
• Available for sale securities, held to maturity securities

Question 2

Financing

Answer 2

• Liabilities and stockholder’s equity
• cash proceeds from issuing equity instruments
• proceeds from issuing bonds, mortgages, note payable and long term debt
• Line of Credit
• principal payments to creditors
• principal payments for capital lease payments for purchase of PPE
  - even though PPE is investing, payments on capital lease would be considered finance, but only the principal because interest is always investing

Question 3

Cash Flow Disclosures

Answer 3

• Income taxes paid, interest paid, reconciliation of net income to net cash flows from Ops activities
• cash flows per share is never represented
• info about non cash investing or financing must be disclosed outside main body of SCF
• Cash inflows and outflows should be netted against each other
• GAAP prefers the direct method

Question 4

Indirect Method

Answer 4

• Going from Accrual to Cash, subtracting or adding back to net income based on if cash has been recognized for transaction
  
  • Depreciation expense is a non-cash charge, and as such needs to be added back to Net Income for Cash
  • Assets/ Long Term Assets Increase - subtract from Net Income
  • Assets/ Long Term Assets decrease - add to net income
  • Liabilities/ Long Term Liabilities Increase - Add to net income
    Liabilities/ Long Term Liabilities Decrease - Subtract from Net Income

Question 5

IFRS - Statement of Cash Flows

Answer 5

• Operating Activities - bank overdrafts are presented
  
  • Interest/ Dividends Received - Can be either operating activities or Investing activities
  • Two years most recent - comparative periods must be presented
• Noncash Investing or Financing activities are not reported on Cash Flow Statement, but disclosed in the notes to the financial statements

Question 6

Financing with a Note Payable for Transaction

Answer 6

• Do not account for cash in the transaction unless payments have been received
• because cash only, unless you are paying principal and interest do not include it in determination