STATEMENT OF CASHFLOWS

Question 1

Examples of Operating activities?

Answer 1

• Cash receipts from sale of goods and services
• Interest on loans
• Dividends on equity securities (dividends received)
• cash payments for other goods and services
• gov for taxes, duties, fines, and fees
• lenders for interest

Question 2

Ex of financing activities?

Answer 2

• Issurance of stock (received cash)
• payment of distrubutions to owners
• treasury stock transactions (repurchase)
• issurance of debt
• repayment or other settlement of debt obgligation
• receipts of resources dobor restricted for long term purposes

Question 3

Ex of investing activities?

Answer 3

• collection of those loans and other acquisition
• loans and other securities that are not cash equivalents
• PP&E and other productive assets
• issurance of stock
• the issurance of debt
• payment of common stock

Question 4

What is the primary purpose of cashflows?

Answer 4

the cash receipts and cash disbursements of an entity during a period

Question 5

Is a purchased a 3-month US Treasury bill reported in the statement of cash flows?

Answer 5

No since they are short term

Question 6

Are trading securities considered cash flows from operating activities?

Answer 6

Yes

Question 7

Are taxes allocated among operating, financing, & investing activities?

Answer 7

No

Question 8

When the statement of cash flows to evaluate a company continuing solvency what section of the cash flows should they look at?

Answer 8

Operation section would be helpful in determining the solvency the ability to pay off its entity noncurrent debts

Question 9

Payment of dividends are from which section of the statement of cash flows?

Answer 9

Financing activities

Question 10

AFS and Held for sale are accounted in which part of the cash flow statement?

Answer 10

Investing activity since it compose of debt and equity instruments

Question 11

If a company acquired land by assuming a mortgage for full acquisition cost

Answer 11

since this doesn’t involve cash we’re not going to include in the statement

Question 12

Are lease payment and interest included in the financing section?

Answer 12

Just the principal not the interest that would go to the operating section

Question 13

Reminder for the activities remember what each activity does to cash for an examples

Dividends paid is cash out or in?
Issurance of the company bonds is cash out or in?

Answer 13

So the dividends paid is a cash outflow meaning cash is going out of business (5,000)

Issurance of the company bonds is where the cash is coming in 10,000

10,000 - 5,000 = 5,000 for financing activity

Question 14

Does the statement of cashflows report accrual basis gains?

Answer 14

No

Question 15

Ex of Non-cash items that affects Net Income?

Answer 15

Depreciation usually are used to add to net income

Unamorized bonds can be added as well

Question 16

When Net Income is not given on the SIM we will need to calc Net Income with the given items how is that calc?

Answer 16

We use the RE for YEAR 8 which is 310,000 and we are also given the dividends declared of 120,000

RE YEAR 8 310,000 = 85,000 RE YEAR 7 + NI for YEAR 8 -120,000

Question 17

Can the gain on the sale of plant asset be included in the operating section of the cashflow statements?

Answer 17

yes bc the gain must be subtracted from the operating section of the cash flow statement. Since in the investing section gains are cash inflows and that must be deducted from NI and the operating section which are included in the gain or minus any loss realized

Question 18

Which section is amortization of the bond discount reported on the statement of cashflows?

Answer 18

Since amortization of bonds is a non-cash items and deducted from Net Income it’s considered to reported in the operating section

Question 19

why is depreciation expense is added back to net income?

Answer 19

reverse noncash charges deducted from net income

Question 20

Are losses that affect the investing and financing activities “Added” or “deducted” from net income?

Question 21

Are Non-cash item required to be removed from the operating activities?

Answer 21

yes even things like a equity based investment reflects the investor’s share of the investee net income

Question 22

If an entity uses the indirect method do we include the “Net interest payments” & “Income taxes paid”?

Answer 22

Net interest payments 220,000 + “Income taxes paid 325,000 = 545,000

Question 23

When you get a problem that gives you operating income and provides all the activities and asks you to calc net income? How to calc it?

Answer 23

you start off with the operating activities amount which is 123,000

and you a depreciation which states depreciation expense decrease you would decrease it

Question 24

Calc, the total interest revenue earned by leaf over?

Answer 24

5,009 payment made x 5 (year note) = 25,045 leaf will receive cash

25,045 leaf will receive cash - 19,485 present value = 5,560

Question 25

A business combination must be accounted for as an acquisition should be included in the total in determining net income?

Answer 25

for the fees of finders and consultants NOT registration fees for equity securities issued

Question 26

bond with stated rate of interest that is less than the effective interest rate on the date of issuance?

Answer 26

Interest expense that is greater than the cash payment made to bondholders

Question 27

Intraperiod income tax allocation arises

Answer 27

due to taxable income being able to be determined in different sections of the financial statements

Question 28

Calc, the unearned revenue for the gift certification of year sale of 250,000 and 10% of gift certifications sold are not redeemed?

Answer 28

Year 2 Sales 250,000 x 10% of gift certifications = 25,000

Next we subtract the unredeemed of 75,000 - 25,000 = 50,000 will be the amount regal will report as unearned revenue

Question 29

Calc, the adjustments other than those indicated by the facts given consolidated net income?

Answer 29

For the Net Income of parent we include the entire amount acquisition 750,000

Question 30

When there is comparsion of transactions for the cashflows from the dates for Dec 31st - Jan 1st?

Answer 30

We need to go from Dec 31st to Jan 1st

Question 31

Is Allowance for credit losses a non-cash item?

Answer 31

Yes, which is usually added or subtracted

Question 32

What are some natural expenses in the NFP?

Answer 32

Salaries, rent, interest and depreciation