Statement of Cash Flows II

Question 1

WHAT information should be disclosed as supplemental information in the Statement of Cash Flows?

Answer 1

THE Conversion of debt to equity.

i.e. This is reported as supplemental information as it represents a financing activity that does not involve cash.

Question 2

HOW would you calculate Ending Accrued Interest Payable?

Answer 2

BEGIN with beginning Interest Payable, increase it by Interest Expense and decrease it by cash paid for interest.

Question 3

WHEN the direct method of preparing a statement of cash flows is used, an enterprise should provide a reconciliation of net income to:

Answer 3

Net cash flows from “Operating” Activities.

Question 4

WHAT is the primary purpose of a Statement of Cash Flows?

Answer 4

TO provide relevant information about cash receipts and disbursements of an enterprise during a period

Question 5

True or False.

A sale of used equipment for cash at a gain would have the same effect on both cash basis and accrual basis net income.

Answer 5

TRUE.

A sale of used equipment for cash at a gain would have the same effect on both cash basis and accrual basis net income.

Therefore, there would be NO difference in Net Income when comparing the Cash Basis to Accrual Basis

Question 6

IF used equipment is sold at a gain, the amount shown as a Cash inflow from Investing Activities equals:

Answer 6

THE carrying amount of the equipment PLUS the gain on the Sale of the Equipment

Question 7

WHAT Information MUST be separately disclosed when using the Indirect Method of Cash Flows?

Answer 7

CASH payments for Interest and Income Taxes

Question 8

WHAT are Sales adjusted by under the Accrual Basis?

Answer 8

> Accounts Receivables (A/R)

> Cost of Good Sold (COGS)

> Inventory

> Accounts Payables (A/P)