STATEMENT OF CASHFLOWS Flashcards
Examples of Operating activities?
- 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
Ex of financing activities?
- 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
Ex of investing activities?
- 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
What is the primary purpose of cashflows?
the cash receipts and cash disbursements of an entity during a period
Is a purchased a 3-month US Treasury bill reported in the statement of cash flows?
No since they are short term
Are trading securities considered cash flows from operating activities?
Yes
Are taxes allocated among operating, financing, & investing activities?
No
When the statement of cash flows to evaluate a company continuing solvency what section of the cash flows should they look at?
Operation section would be helpful in determining the solvency the ability to pay off its entity noncurrent debts
Payment of dividends are from which section of the statement of cash flows?
Financing activities
AFS and Held for sale are accounted in which part of the cash flow statement?
Investing activity since it compose of debt and equity instruments
If a company acquired land by assuming a mortgage for full acquisition cost
since this doesn’t involve cash we’re not going to include in the statement
Are lease payment and interest included in the financing section?
Just the principal not the interest that would go to the operating section
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?
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
Does the statement of cashflows report accrual basis gains?
No
Ex of Non-cash items that affects Net Income?
Depreciation usually are used to add to net income
Unamorized bonds can be added as well
When Net Income is not given on the SIM we will need to calc Net Income with the given items how is that calc?
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
Can the gain on the sale of plant asset be included in the operating section of the cashflow statements?
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
Which section is amortization of the bond discount reported on the statement of cashflows?
Since amortization of bonds is a non-cash items and deducted from Net Income it’s considered to reported in the operating section
why is depreciation expense is added back to net income?
reverse noncash charges deducted from net income
Are losses that affect the investing and financing activities “Added” or “deducted” from net income?
Are Non-cash item required to be removed from the operating activities?
yes even things like a equity based investment reflects the investor’s share of the investee net income
If an entity uses the indirect method do we include the “Net interest payments” & “Income taxes paid”?
Net interest payments 220,000 + “Income taxes paid 325,000 = 545,000
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?
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
Calc, the total interest revenue earned by leaf over?
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
A business combination must be accounted for as an acquisition should be included in the total in determining net income?
for the fees of finders and consultants NOT registration fees for equity securities issued
bond with stated rate of interest that is less than the effective interest rate on the date of issuance?
Interest expense that is greater than the cash payment made to bondholders
Intraperiod income tax allocation arises
due to taxable income being able to be determined in different sections of the financial statements
Calc, the unearned revenue for the gift certification of year sale of 250,000 and 10% of gift certifications sold are not redeemed?
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
Calc, the adjustments other than those indicated by the facts given consolidated net income?
For the Net Income of parent we include the entire amount acquisition 750,000
When there is comparsion of transactions for the cashflows from the dates for Dec 31st - Jan 1st?
We need to go from Dec 31st to Jan 1st
Is Allowance for credit losses a non-cash item?
Yes, which is usually added or subtracted
What are some natural expenses in the NFP?
Salaries, rent, interest and depreciation
