Statement_of_Cash_Flows[1]

Question 1

What items are included in operating activities on the Statement of Cash Flows?

Answer 1

Cash received from Customers- Interest & Dividends- Trading Securities

Cash paid to Vendors- Suppliers- Interest- Taxes- Trading Securities

Question 2

What items are included in investing activities on a Statement of Cash Flows?

Answer 2

Cash received: Sale of PP&E- Sale of Investments- Loan Principle

Cash paid: Loans- Acquisitions- AFS or HTM Securities- Taxes- Trading Securities

Question 3

What items are included in Financing Activities in a Statement of Cash Flows?

Answer 3

Cash received: Issuance of Stock- Issuance of Debt

Cash paid: Dividends

Question 4

What is the direct method for a Statement of Cash Flows?

Answer 4

Starts with Income from Continuing Operations

Adjusts for changes in accounts like A/R- A/P- Inventory and non-cash revenues- expenses- gains- losses

If used- the Indirect Method must also be shown

Question 5

What is the Indirect Method for a Statement of Cash Flows?

Answer 5

Starts with Net Income

Adjusts for changes in accounts like A/R- A/P- Inventory and non-cash revenues- expenses- gains- losses

Question 6

What is the cash flow category for interest paid and received?

Answer 6

Operating Activities.

Question 7

What is the direct method on the statement of cash flows?

Answer 7

This method presents actual inflows and outflows from cash operations. Must also disclose the indirect method (reconciliation of net income to cash flows from operations) as a supporting schedule.

Question 8

What is the indirect method on the statement of cash flows?

Answer 8

Reconciles net income to cash flows from operating activities.

Question 9

What is the cash flow category for collections of principal amounts on loans made to other entities?

Answer 9

The category is Investing.

Question 10

Name the four major sections in the direct method cash flow statement.

Answer 10

Operating cash flows;
Investing cash flows;
Financing cash flows.
Reconciliation of net income and net operating cash flows.

Question 11

List the required categories for the Statement of Cash Flows.

Answer 11

Net cash inflow or outflow from Operating Activities;
Net cash inflow or outflow from Investing Activities;
Net cash inflow or outflow from Financing Activities;
Effects of Foreign Currency Translation;
Reconciliation of net cash inflows/outflows with the reported change in cash and cash equivalents on the Balance Sheet;
Non-cash Investing and Financing Activities.

Question 12

What is the reporting basis of the statement of cash flows?

Answer 12

The reporting basis is cash and cash equivalents.

Question 13

What is reported on the Statement of Cash Flows?

Answer 13

Information about the cash receipts and cash payments for an entity;
The difference between net income and net operating cash flows;
Information about investing and financing activities which do not involve cash inflows or outflows.

Question 14

When is a Statement of Cash Flows required?

Answer 14

For all business enterprises that report both financial position (Balance Sheet) and results of operations (Income Statement) for a period.

Question 15

What is the basic purpose of the statement of cash flows?

Answer 15

The basic purpose is to provide information about the cash receipts and cash payments for an entity to help investors, creditors, and others.

Question 16

What are some examples of cash inflows classified as Investing Activities?

Answer 16

Sale of long-term assets;
Collection of loan principal;
Disposal of held to maturity (HTM) and available for sale (AFS) debt and equity securities;
Sale of productive assets (not inventory).

Question 17

What are some examples of cash outflows classified as Investing Activities?

Answer 17

Purchase of long-term assets;
Lending to others;
Investment in debt and equity securities held to maturity and available for sale);
Purchase of productive assets (not inventory).

Question 18

What are some examples of cash outflows classified as Financing Activities?

Answer 18

Repurchase of own stock;
Paying back lenders (principal only);
Payment of dividends.

Question 19

What is the cash flow category for purchases of trading securities?

Answer 19

The category is Operating.

Question 20

What is the cash flow category for purchases of securities available for sale?

Answer 20

The category is Investing.

Question 21

What is the cash flow category for dividends paid?

Answer 21

The category is Financing.

Question 22

What is the cash flow category for principal payments on short-term and long-term loans from financial institutions made to acquire inventory for resale?

Answer 22

The category is Financing.

Question 23

What is the cash flow category for loans made to other entities?

Answer 23

The category is Investing.

Question 24

What is the cash flow category for principal payments on short-term and long-term loans (from financial institutions or dealers) made to acquire plant assets?

Answer 24

The category is Financing.

Question 25

What is the purpose of the operating section of the statement of cash flows under the indirect method?

Answer 25

The purpose is to adjust accrual net income to net cash flow from operating activities.

Question 26

What is the purpose of the operating section of the statement of cash flows under the direct method?

Answer 26

The purpose is to show all cash inflows and outflows for operating activities.

Question 27

Using the indirect method for reporting cash flows from operations, should an increase in accounts receivable be added to or subtracted from accrual based net income?

Answer 27

An increase in accounts receivable should be subtracted.

Question 28

Using the indirect method for reporting cash flows from operations, should a decrease in inventory be added to or subtracted from accrual based net income?

Answer 28

A decrease in inventory should be added.

Question 29

Using the indirect method for reporting cash flows from operations, should an increase in accounts payable be added to or subtracted from accrual based net income?

Answer 29

An increase in accounts payable should be added.

Question 30

Using the indirect method for reporting cash flows from operations, should a decrease in unearned revenue be added to or subtracted from accrual based net income?

Answer 30

A decrease in unearned revenue should be subtracted.