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Exam 19: Statement of Cash Flows

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Question 31

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What is an investing activity?

A) Activities involving the acquisition and disposal of long-term assets.
B) Activities involving changes in the size and composition of the contributed equity.
C) Activities involving the principal revenue-producing activities of the entity.
D) Activities that do not involve cash.

E) B) and C)
F) A) and D)

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Question 32

Multiple Choice

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Which statement is correct?

A) A held for trading security can be classified as cash.
B) A held to maturity security can be classified as cash.
C) A held for trading security can be classified as cash equivalent
D) A held for trading security can be classified as cash equivalent.

E) A) and B)
F) A) and C)

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Question 33

Multiple Choice

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Which of the following is a financing activity?

Which of the following is not correct?

Which statement about "cash and cash equivalents" is correct?

Green Leaf 's activities for the year ended December 31,2016 included the following: • Comprehensive income totaled $538,000 including $88,000 in other comprehensive income. • Paid a cash dividend of $80,000 that was declared in 2015. • Interest expense for the year was $29,000; the opening and closing balances in the interest payable account were $26,000 and $17,000,respectively. • Accounts receivable increased $33,000 and accounts payable decreased $24,000 during the year. • The company paid $56,000 cash for equipment. • The company sold held-to-maturity investments for $26,000.The book value of the investment was $27,000. • Depreciation expense for the year totaled $19,000. • Suffered an impairment loss on patents of $10,000. • Declared and issued a 2-for-l stock split.There were 400,000 ordinary shares outstanding before the split with a collective market value of $100,000,000. Requirement: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Financial information for Fesone Inc.'s balance sheet for fiscal 2013 and 2014 follows: $\begin{array}{lll} & \textbf {2014}& \textbf {2013} \\\\\text { Cash } & 204,800 & 550,000 \\\\\text { Accounts receivable } & 1,150,000 & 1,300,000 \\\\\text { Inventory } & 410,000 & 250,000 \\\\\text { Investments - held for trading } & 400,000 & \\\\\text { Investments - held to maturity } & 150,000 & \\\\\text { Property plant and equipment } & 3,400,000 & 3,400,000 \\\\\text { Accumulated depreciation } & (1,860,000) & (1,570,000) \\\\\text { Total } & \mathbf{3 , 8 5 4 , 8 0 0} & \mathbf{3 , 9 3 0 , 0 0 0}\end{array}$ $\begin{array}{lll}\text { Accounts payable } & 260,000 & 80,000 \\\\\text { Bank loan } & 2,226,000 & 2,850,000 \\\\\text { Bonds payable } & 187,800 & 185,000 \\\\\text { Preferred shares } & 0 & 15,000 \\\\\text { Common shares } & 597,000 & 450,000 \\\\\text { Retained earnings } & 584,000 & 350,000 \\\\\text { Total } & \mathbf{3 , 8 5 4 , 8 0 0} & \mathbf{3 , 9 3 0 , 0 0 0}\end{array}$ 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 held-to-maturity investments. 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.Assume that Fesone designates the held-for-trading investment as a cash equivalent. Requirements: a.Prepare a statement of cash flows for the year ended December 31,2014 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.

Which category is used on the cash flow statement?

Which is a correct statement?

Reuse It Inc.'s activities for the year ended December 31,2016 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 2015. • 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 held-to-maturity investments 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. Requirement: 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.

Which of the following is an operating activity?

The activities for the year ended December 31,2018 included the following: • Sold a held-for-trading investment for $10,000.The book value was $15,000. • Sold an available-for-sale investment for $10,000.The book value was $5,000. How much would be presented as cash flow from operating activities?

Complete the following: a.List the three primary sources of information required to prepare a statement of cash flows. b.A company may report its accounts receivable at the gross amount less an allowance for bad debts.Contrast the direct and indirect methods of adjusting for accounts receivable reported at the gross amount. c.Briefly discuss how cash flows arising from the purchase and sale of treasury shares are reported on the statement of cash flows. d.Briefly discuss how other comprehensive income is reported on the statement of cash flows. e.Briefly discuss how cash flows arising from investments in associates are reported on the statement of cash flows. f.Briefly discuss the alternatives for reporting discontinued operations in the statement of cash flows.

What is an operating activity?

Which statement is not correct?

What is not a "non-cash" transaction?

On January 1,2017,Adara acquired equipment under a finance lease.The lease calls for fifteen annual payments of $10,000 due at the beginning of the year.Adara must return the equipment to the lessor at the end of the lease.The January 1,2017 payment was made as agreed.The implicit rate in the lease is 7%; the present value of the lease payments is $97,455. Requirements: a.Prepare the underlying journal entries to record the foregoing transactions and record events stemming from the transactions (e.g.,the accrual of interest at year-end). b.For each entry identify the cash flow effects,if any,under both the direct and indirect methods of presentation and classify the cash flow according to its nature.

Which statement is correct?