Which of the following should not be disclosed in an enterprise’s statement of cash flows prepared using the indirect method?
A. Income taxes paid.
B. Dividends paid on preferred stock.
C. Cash flow per share.
D. Interest paid, net of amounts capitalized.
C. Cash flow per share
What is shown in the supplementary disclosure of SCF when using the indirect method?
Cash paid for interest (net interest payments) and income taxes paid
New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000. New England’s cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000 and proceeds of $40,000 were received from the sale. What was New England’s cash balance at the end of the year?
351,000 - 420,000 + 250,000 + 27,000 = 208,000
Mend Co. purchased a three-month U.S. Treasury bill. Mend’s policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Mend’s statement of cash flows?
Not reported in the SCF sections since it is viewed as cash or cash equivalent (went from cash to cash).
Which of the following should not be disclosed in an enterprise’s statement of cash flows prepared using the indirect method?
A. Interest paid, net of amounts capitalized. B. Income taxes paid. C. Cash flow per share. D. Dividends paid on preferred stock.
C.
Cash flow per share.
The primary purpose of a statement of cash flows is to provide relevant information about:
A. Differences between net income and associated cash receipts and disbursements. B. An enterprise's ability to generate future positive net cash flows. C. The cash receipts and cash disbursements of an enterprise during a period. D. An enterprise's ability to meet cash operating needs.
The cash receipts and cash disbursements of an enterprise during a period.
DECIPHER between cash inflows and outflows.
Which of the following supplemental disclosures to the statement of cash flows is not required when the indirect method is used?
A. Income taxes paid. B. Reconciliation of net income to net cash provided by operating activities. C. Interest paid. D. Noncash investing and financing activities.
Reconciliation of net income to net cash provided by operating activities only needed for direct method not indirect.
Karr, Inc. reported net income of $300,000 for Year 2. Changes occurred in several balance sheet accounts as follows:
Equipment Increase
25,000
Accumulated depreciation increase
40,000
Note payable increase
30,000
Additional information:
During Year 2, Karr sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.
In December, Year 2, Karr purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000.
Depreciation expense for the year was $52,000.
In Karr’s Year 2 statement of cash flows, net cash provided by operating activities should be:
300,000 - 5,000 + 52,000 = 347,000
Twin House Inc. reported net income of $753,000 for the current year-ended December 31. Twin House’s financial statements reflected the following information:
Depreciation expense
150,000
Gain on sale of trading securities
6,000
Goodwill impairment
75,000
Decrease in accounts receivable
48,000
Increase in inventory
33,000
Decrease in trading securities
50,000
Increase in available-for-sale securities
62,000
Increase in accounts payable
70,000
Decrease in taxes payable
15,000
Dividend paid
200,000
Dividend received
27,000
What should Twin House report as net cash provided by operating activities on the statement of cash flows, assuming that Twin House classifies the proceeds from the sale of the trading securities as an operating cash inflow?
753,000 + 150,000 + 75,000 + 48,000 - 33,000 + 50,000 + 70,000 - 15,000 = 1,098,000
Gain on sale SINCE STATED PROCEEDS ARE REPORTED AS OPERATING CASH INFLOW, dividend received already in net income
The following information pertains to Ash Co., which prepares its statement of cash flows using the indirect method:
Interest payable at beginning of year
15,000
Interest expense during the year
20,000
Interest payable at end of year
5,000
What amount of interest should Ash report as a supplemental disclosure of cash flow information?
Payable is balance sheet
Expense is income statement
15,000 - 5,000 = 10,000
20,000 + 10,000 = 30,000 was paid
Martin Co. had net income of $70,000 during the year. Depreciation expense was $10,000. The following information is available:
Accounts receivable increase
$20,000
Equipment gain on sale increase
10,000
Nontrade notes payable increase
50,000
Prepaid insurance increase
40,000
Accounts payable increase
30,000
What amount should Martin report as net cash provided by operating activities in its statement of cash flows for the year?
70000
10000
-20000
-10000
-40000
30000
= 40,000
Nontrade notes payable goes to financing
The following information is from Mabel Co.’s year-end financial statements for the current and previous years:
CY PY
Prepaid expenses 10,000 20,000
Accounts payable 50,000 30,000
Land 250,000 600,000
Land was sold during the current fiscal year for cash resulting in a loss of $40,000. What is Mabel’s net adjustment to net income to determine net cash from operating activities?
40000
10000
20000
=70,000
A company reported $100,000 of interest expense for the current year. Items affecting this calculation are listed below:
Total interest paid during the year $106,000
Interest accrued at year end $3,000
Interest capitalized during building construction $14,000
Interest recognized on zero-coupon bonds due in four years $5,000
If the company uses the indirect method of preparing the cash flow statement, what amount should the company report as its supplemental disclosure for interest paid during the year?
Two ways to solve
Interest paid - open interest
106,000 - 14,000 = 92,000
Interest Expense - Accrued Interest - Bond Interest Expense
100,000 - 3,000 - 5,000 = 92,000
Kringle Co.’s statement of cash flow contains the following:
Increased accounts receivables $4,000
Purchase of fixed assets 14,000
Sale of equipment 25,000
Payment of dividends 8,000
Increased accounts payable 12,000
Proceeds from borrowing 3,000
What amount is the net increase or decrease in cash?
-4000
-14000
25000
-8000
12000
3000
= 14,000
In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment:
A. Plus the gain. B. Plus the gain and less the amount of tax attributable to the gain. C. Plus both the gain and the amount of tax attributable to the gain. D. With no addition or subtraction.
Plus the gain (the proceeds of the equipment)
On a statement of cash flows, cash flows from investing activities would be decreased by which of the following?
A. Issuance of common stock. B. Purchase of long-term investments. C. Issuance of bonds payable. D. Payment of dividends.
Purchase of long-term investments.
Which of the following would be reported as an investing activity in a company’s statement of cash flows?
A. Collection of proceeds from a note payable. B. Collection of a note receivable from a related party. C. Collection of an overdue account receivable from a customer. D. Collection of a tax refund from the government.
Collection of a note receivable from a related party.
Which of the following transactions should be classified as investing activities on an entity’s statement of cash flows?
A. Increase in accounts receivable. B. Sale of property, plant and equipment. C. Payment of cash dividend to the shareholders. D. Issuance of common stock to the shareholders.
Sale of property, plant and equipment.
Green Co. had the following equity transactions at December 31:
Cash proceeds from sale of investment in Blue Co. (carrying value - $60,000)
$75,000
Dividends received on Grey Co. stock
10,500
Common stock purchased from Brown Co.
38,000
What amount should Green recognize as net cash from investing activities in its statement of cash flows at December 31 under U.S. GAAP?
75,000 - 38,000 = 37,000
Polk Co. acquires a forklift from Quest Co. for $30,000. The terms require Polk to pay $3,000 down and finance the remaining $27,000. On March 1, Year 1, Polk pays the $3,000 down and accepted delivery of the forklift. Polk signed a note that requires Polk to pay principal payments of $1,000 per month for 27 months beginning July 1, Year 1. What amount should Polk report as an investing activity in the statement of cash flows for the year ended December 31, Year 1?
3,000 investing
6,000 financing outflow for the principal payments for the year
27,000 noncash outlfow
During the year, Verity Co. purchased $200,000 of Otra Co. bonds at par and $50,000 of U.S. Treasury bills. Verity classified the Otra bonds as available-for-sale securities and the Treasury bills as cash equivalents. In Verity’s statement of cash flows, what amount should it report as net cash used in investing activities?
200k bonds at par are investing cash outflow
On July 1 of the current year, Dewey Co. signed a 20-year building lease that it reported as a capital lease. Dewey paid the monthly lease payments when due. How should Dewey report the effect of the lease payments in the financing activities section of its statement of cash flows?
The principal payments of lease only (outflow).
A company is preparing its year-end cash flow statement using the indirect method. During the year, the following transactions occurred:
Dividends paid
300
Proceeds from the issuance of common stock
250
Borrowings under a line of credit
200
Proceeds from the issuance of convertible bonds
100
Proceeds from the sale of a building
150
What is the company’s increase in cash flows provided by financing activities for the year?
-300 + 250 + 200 + 100 = 250
Indigo Corporation is preparing its Statement of Cash Flows for the current year ended December 31 using the indirect method and has developed the following data:
Increase in deferred tax liabilities
23,000
Decrease in accounts payable
(58,000)
Increase in accrued interest payable
43,000
Interest paid
31,000
Proceeds from issuance of long-term debt
600,000
Payments on long-term debt
(49,000)
Purchase of bonds payable
90,000
Based on the information developed above, Indigo would report net cash provided from Operating, Investing, and financing activities of:
Operating:
DTL and Int Accrued Payable increases are liabilities which increase operating section.
23,000 - 58,000 + 43,000 = 8,000
Investing:
-90,000
Financing:
600,000 - 49,000 = 551,000
Disclosure:
Interest Paid 31,000
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Simple Notes32
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F1 - M1 (BS,IS, CI)59
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F1 - M2 (EPS/PublicCRT)34
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F1 - M3 (StockHE PT1)42
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F2 - M1 (RevR)38
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F2 - M2 (Acct Changes & Error Corrections)27
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F2 - M3 (AJE)41
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F2 - M4 (Notes FS)6
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F2 - M8 (Ratios)34
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F3 - M2 (Trade Receivables)23
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F3 - M4 (Cost Basis)1
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F2 - M7 (FV)11
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F6 - M6 (Gov Fund Struct/FA)25
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F6 - M6 (Gov Acct Over)10
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F6 - M4 (NFP)25
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F6 - M3 (NFP Rev Rec)69
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F6 - M1-M2 (NFP FR)91
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F1 - M7 (Spec Purp Framework)14
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F2 - M5 (SubEvents)3
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F5 - M7 (Inc Tax PT. 1/2)101
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F6 - M5 (SCF)32
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F5 - M4 (Partnerships)17
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F5 - M3 (Consolidation)47
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F5 - M1 (Financial Instr)36
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F4 - M7 (Lease Liabilities)44
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F4 - M6 (Troubled Restru)30
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F4 - M5 (Bonds)53
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F3 - M3 (Inv)66
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F3 - M4 (PPE Cost Basis)28
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F3 - M5 (PPE Dep, Disp, Impair)32
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F3 - M6 (Intangibles)12
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F4 - M1 (Payables Acc)50
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F4 - M2 (Contingencies and Commitments)12
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F4 - M3 (LT Liabilities)21
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F5 - M2 (Equity Method)42
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F3 - M1 Cash3
