Chapter 17

Question 1

The primary purpose of a statement of cash flows

Answer 1

is to provide information about the cash receipts and payments of an entity during a period.

Question 2

What are the 3 sections in a statement of cash flow

Answer 2

1. operating
2. investing
3. financing

Question 3

Statement of cash flows cash inflows from operating activities:

Answer 3

1. Cash receipts from the sale of goods and services (including collections of accounts receivable)
2. Cash receipts from royalties, fees, commissions, and other revenue
3. Cash received in the form of interest or dividends
4. Cash receipts from certain loans and other debt and equity instruments of other entities that are acquired specifically for resale in the short term

Question 4

Statement of cash flows cash outflows from operating activities:

Answer 4

1. Cash payments to suppliers for goods and services
2. Cash payments to employees
3. Cash payments to government for taxes, duties, fines, and other fees or penalties
4. Payments of interest on debt

Question 5

Statement of cash flows cash outflows (and inflows) from investing activities:

Answer 5

1. Cash payments to acquire (cash receipts from sale of) property, plant and equipment; intangible assets; and other long lived assets
2. Cash payments to acquire (cash receipts from sale and maturity of) equity and debt instruments of other entities for investing purposes
3. Cash advances and loans made to other parties (cash receipts from repayment of advances and loans made to other parties)

Question 6

statement of cash flows cash inflows from financing activities:

Answer 6

1. Cash proceeds from issuing shares and other equity instruments (obtaining resources from owners)
2. Cash proceeds from issuing loans, notes, bonds, and other short-term or long-term borrowings

Question 7

statement of cash flows cash outflows from financing activities:

Answer 7

1. Cash repayments of amounts borrowed
2. Payments of cash dividends
3. Cash payments to acquire or redeem the entity’s own shares
4. Cash payments by a lessee for a reduction of the outstanding liability relating to a capital lease

Question 8

SCF increase in current operating liabilities

Answer 8

Add to net income

Question 9

SCF decrease in current operating assets

Answer 9

add to net income

Question 10

SCF increase in current operating assets

Answer 10

subtracted from net income

Question 11

SCF decrease in current operating liablities

Answer 11

subtracted from net income

Question 12

SCF Noncash losses and expenses included in net income

Answer 12

Added to net income

Question 13

SCF Losses and expenses whose cash effects are related to investing or financing cash flows

Answer 13

Added to net income

Question 14

SCF Noncash gains and revenues included in net income

Answer 14

subtracted from net income

Question 15

SCF Gains and revenues whose cash effects are related to investing or financing cash flows

Answer 15

subtracted from net income

Question 16

What must be disclosed in the indirect method of statement of cash flows

Answer 16

1. interest paid

2. income taxes paid