Question 1

Which statement is correct?
A)Cash flows are grouped by operating, investing and financing activities.
B)Cash inflows and outflows are netted against each other.
C)Net interest received or paid can be offset in the cash flow statement.
D)Income tax paid does not need to be disclosed.

Accepted Answer

Cash flows are categorized into operating, investing, and financing activities in the cash flow statement.

Question 2

Boboto Inc.'s policy is to report all cash flows arising from interest and dividends in the operating section. Boboto's activities for the year ended December 31, 2021 included the following:
• Declared and issued a stock dividend valued at $50,000.
• Paid $46,000 to repurchase ordinary shares and cancelled them. The book value was $33,000.
• Accounts payable decreased $23,000 during the year.
• Issued $1,500,000 in bonds. The cash proceeds were $1,410,000.
• Interest expense for the period was $10,000. The interest payable account decreased $4,000.
• Made a $75,000 principal payment on a bank loan.
• Declared a $15,000 cash dividend payable on January 15, 2022.
Required:
a. Prepare the cash flows from financing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not financing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of Boboto Inc.'s policy is to report all...

Question 3

Katie Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Katie's activities for the year ended December 31, 2021 included the following:
• Income tax expense for the year was $30,000.
• Sales for the year were $1,030,000.
• Accounts payable decreased $20,000 in 2021.
• Selling and administration expenses for the year totaled $240,000.
• Accounts receivable decreased $36,000 in 2021.
• Mamie's cost of goods sold in 2021 was $315,000.
• Mamie's inventory increased $13,000 during the year.
• Interest expense for the period was $12,000. The interest payable account increased $5,000.
• Dividends were not declared during the year; however, the dividends payable account increased $5,000.
• Sold an investment at FVOCI for $45,000. The original cost was $52,000.
• Depreciation expense for the year was $19,000.
Required:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.
b. Identify how the activities listed above that are not operating activities would be reported in the statement of cash flows.

Accepted Answer

The answer of Katie Ltd.'s policy is to report all...

Question 4

Which statement is true?
A)Stock splits and dividends are non-cash transactions. They are not recorded on the SCF.
B)Cash flows from the purchase and sale of treasury shares are reported as an investing activity.
C)OCI is normally reported in the financing section of the SCF.
D)Cash flows from discontinued operations would never be reported in the investing section of the SCF regardless of their nature.

Accepted Answer

Stock splits and dividends are indeed non-cash transactions. Stock splits do not involve the exchange of cash and merely adjust the number of shares outstanding and the per-share price. Dividends, while they can involve cash when paid, do not affect the statement of cash flows (SCF) when declared. The declaration of dividends is a financing activity, but the actual payment is what impacts the SCF, not the declaration itself.

Question 5

Rusabh Ltd.'s policy is to report all cash flows arising from interest and dividends in the operating section. Rusabh's activities for the year ended December 31, 2021 included the following:
• Sold an investment at FVPL for $16,000. The book value of this investment, which was held for trading purposes, was $13,000.
• Purchased an investment at FVOCI for $51,000.
• Borrowed $100,000 from the bank for investment purposes.
• Sold equipment for $23,000 that originally cost $55,000. The net book value of this item at time of sale was $35,000.
• Purchased inventory costing $84,000 for cash.
• Received $8,000 in interest and 5,500 in dividends on sundry investments.
• Acquired the right to use forklift costing $32,000 under a lease agreement.
• Acquired land and buildings valued at $100,000 by issuing ordinary shares.
• Bought $400,000 in bonds at a discount, paying $375,000 cash.
Required:
a. Prepare the cash flows from investing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not investing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of Rusabh Ltd.'s policy is to report all...

Question 6

ABC Inc.'s policy is to report all cash flows arising from interest and dividends in the operating activities section. Tub Time's activities for the year ended December 31, 2020 included the following:
• Net income after taxes totaled $400,000.
• The company recorded a $4000 goodwill impairment loss during the year.
• Depreciation expense for the year was $24,000.
• Declared and issued a stock dividend valued at $10,000.
• Accounts receivable increased $33,000 in the year.
• Sold an investment at FVPL for $23,000. The book value was $18,000. The investment was held for trading purposes
• Interest revenue for the period was $6,000. The interest receivable account decreased $4,000.
• Declared a $10,000 dividend payable. The dividends payable account decreased $19,000 in the year.
• Sold an investment at FVOCI for $19,000. The original cost was $14,000.
Required:
a. Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
b. Identify how the activities listed above that are not operating activities would be required in the statement of cash flows.

Accepted Answer

The answer of ABC Inc.'s policy is to report all...

Question 7

How are cash flows from discontinued operations shown in the statement of cash flows?

Accepted Answer

The answer of How are cash flows from discontinued operations...

Question 8

Financial information for Fesone Inc.'s balance sheet for fiscal 2020 and 2021 follows:  Additional information:
1. Preferred shares were converted to common shares during the year at their book value.
2. The face value of the bonds is $200,000; they pay a coupon rate of 6% per annum. The effective interest rate of interest is 8% per annum. They are reported at amortized cost.
3. Net income was $290,000.
4. There was an ordinary stock dividend valued at $12,000 and cash dividends were also paid.
5. Interest expense for the year was $130,000. Income tax expense was $116,000.
6. Fesone arranged for a $200,000 bank loan to finance the purchase of the investments at amortized cost.
7. Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities, respectively.
8. The investment at FVPL is held to meet short-term cash commitments.
Required:
a. Prepare a statement of cash flows for the year ended December 31, 2021 using the indirect method.
b. Discuss how the transaction(s)above that are not reported on the statement of cash flows are reported in the financial statements.

Accepted Answer

The answer of Financial information for Fesone Inc.'s balance sheet...

Question 9

Provide a summary of presentation and disclosure requirements relating to the statement of cash flows.
Summary of presentation and disclosure requirements relating to the statement of cash flows.
Presentation:
Disclosure:

Accepted Answer

The answer of Provide a summary of presentation and disclosure...

Question 10

Soorya Law Ltd.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section. Soorya Law's activities for the year ended December 31, 2019 included the following:
• Sold an investment at FVPL for $11,000. The book value of this investment, which was held to meet short-term cash commitments, was $11,000.
• Sold an investment at FVOCI for $27,000. The cost of the investment was $27,000.
• Borrowed $120,000 from the bank for investment purposes.
• Sold equipment for $63,000 that originally cost $80,000. The net book value of this item at time of sale was $54,000.
• Received $5,000 in interest and $5,000 in dividends on sundry investments.
• Paid $4,000 interest on the investment loan.
• Acquired land and buildings valued at $450,000 by paying $150,000 cash and issuing ordinary shares for the balance.
• Bought $350,000 in bonds at a premium, paying $305,000 cash.
Required:
a. Prepare the cash flows from investing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not investing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of Soorya Law Ltd.'s policy is to report...

Question 11

How is other comprehensive income (OCI)shown on the Statement of Cash Flows (SCF)?

Accepted Answer

The answer of How is other comprehensive income (OCI)shown on...

Question 12

George Corp.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section. Angela's activities for the year ended December 31, 2019 included the following:
• Declared a $12,000 cash dividend payable on January 15, 2020.
• Acquired the right to use an automobile costing $30,000 under a lease agreement.
• Declared and issued a stock dividend valued at $15,000.
• Issued $330,000 in ordinary shares.
• Accounts payable increased $18,000 during the year.
• Paid $980,000 to repurchase bonds. The book value of the bonds was $1,010,000.
• Made a $15,000 principal payment on a bank loan.
• Interest expense for the period was $8,000. The interest payable account increased
$2,000.
Required:
a. Prepare the cash flows from financing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not financing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

Accepted Answer

The answer of George Corp.'s policy is to report all...

Question 13

Financial information for Fesone Inc.'s balance sheet for fiscal 2020 and 2021 follows:  Additional information:
1. Preferred shares were converted to common shares during the year at their book value.
2. The face value of the bonds is $200,000; they pay a coupon rate of 6% per annum. The effective interest rate of interest is 8% per annum.
3. Net income was $290,000.
4. There was an ordinary stock dividend valued at $12,000 and cash dividends were also paid.
5. Interest expense for the year was $130,000. Income tax expense was $116,000.
6. Fesone arranged for a $200,000 bank loan to finance the purchase of the investment at amortized cost.
7. Fesone has adopted a policy of reporting cash flows arising from the payment of interest and dividends as operating and financing activities, respectively.
8. The investment at FVPL is held for trading purposes.
Required:
a. Prepare a statement of cash flows for the year ended December 31, 2021 using the indirect method.
b. Discuss how the transaction(s)above that are not reported on the statement of cash flows are reported in the financial statements.

Accepted Answer

The answer of Financial information for Fesone Inc.'s balance sheet...

Question 14

How do companies account for allowance for doubtful accounts on the cash flow statement?

Accepted Answer

The answer of How do companies account for allowance for...

Question 15

Reuse It Inc.'s activities for the year ended December 31, 2022 included the following:
• Comprehensive income totaled $468,000 including $88,000 in other comprehensive income.
• Paid a cash dividend of $30,000 that was declared in 2021.
• Interest expense for the year was $14,000; the opening and closing balances in the interest payable account were $28,000 and $19,000, respectively.
• Accounts receivable increased $63,000 and accounts payable decreased $19,000 during the year.
• RII paid $51,000 cash for equipment.
• RII sold an investment at amortized cost for $36,000. The book value of the investment was $39,000.
• Depreciation expense for the year totaled $9,000.
• Suffered an impairment loss on patents of $1 0,000.
• Declared and issued a 2-for-l stock split. There were 20,000 ordinary shares outstanding before the split with a collective market value of $3,000,000.
Required:
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method, assuming that the company's policy is to report interest and dividends received as an investing activity, and interest and dividends paid as a financing activity.

Accepted Answer

The answer of Reuse It Inc.'s activities for the year...

Quiz 10: Statement of Cash Flows

Which statement is correct?

Which statement is true?

How are cash flows from discontinued operations shown in the statement of cash flows?

Provide a summary of presentation and disclosure requirements relating to the statement of cash flows. Summary of presentation and disclosure requirements relating to the statement of cash flows. Presentation: Disclosure:

How is other comprehensive income (OCI)shown on the Statement of Cash Flows (SCF)?

How do companies account for allowance for doubtful accounts on the cash flow statement?