F7-Cash Flow

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 effects of transactions obtaining resources from owners & providing them with a return on their investment

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
• 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
• Non-cash revenues- expenses- gains- losses

Question 6

Cash & Cash Equivalents Reconciliations

Answer 6

• Statement of Cash Flows reconciles the cash & cash Equiv. amount presented on the Beginning Balance sheet
• To the cash & cash Equiv. amount presented on the ending B/S
• The change in cash for the period

Question 7

Cash & Cash Equivalents

Answer 7

• Cash equivalents are defined as short-term, liquid investment that are:
• Quickly convertible into specific amounts

&

-So near maturity that the risk of changes in the value b/c of interest rate changes is significant

Question 8

Operating Activities- Direct Method

Answer 8

• Major classes of cash receipts & Disbursements are presented in their GROSS amounts.

Question 9

Operating Activities to report separately

Answer 9

Increases Cash:

• Cash Received from customers
• Interest Received
• Dividends Received
• Insurance proceeds & Lawsuit settlements
• Sales of Securities classified as trading securities
• Cash paid to suppliers & employees
  (Decreases cash)

Question 10

Operating Activities- Indirect Method

Answer 10

• Net Income is adjusted to arrive at net cash flows from operating activities
• Supplemental Disclosure of cash paid for interest & income taxes is required.

Question 11

Adjustments made to Operating Activities Section “CLAD”

Answer 11

CLAD:

• Current Assets & Liabilities
• Losses & Gains
• Amortization & Depreciation
• Deferred Items

Question 12

What is NOT disclosed on the St. of Cash Flows when using the Direct Method, US GAAP?

Answer 12

• A Recon. of Ending R/E to net cash flow from operations.

Question 13

Investing Activities items

Answer 13

• Purchase of A/S Bonds (Net Amount)
• Sale of Equipment (add)
• Purchase of Equipment (Subtract)

Question 14

Operating Activities that are ADDED back to Net Income

Answer 14

• Dep. Expense

Question 15

Operating Activities that are DEDUCTED From Net Income

Answer 15

• Gains
• Increase in Inventory
• Decrease in A/P

Question 16

Financing Activities Items

Answer 16

• Sale of Treasury Stock is Added

- Dividend Payment & Retirement of bonds:Subtract

Question 17

In St. of CF, If used equipment is sold at a gain, the amount shown as cash Inflow from investing activities equals?

Answer 17

-the carrying amt Plus the Gain

Question 18

How would a Capital Lease payment be reported in the St. of Cash Flows?

Answer 18

• The cash outflow Principal payments are reported in the Financing Section
• The cash outflow Interest payments would be reported as a component of cash from Operating Activities.

Question 19

How should a gain from the sale of Used Equip. for cash b reported in St. of Cash Flows, INDIRECT METHOD?

Answer 19

• In Operating Activities as a deduction from Income.

Question 20

Amortization of a Bond Discount using Indirect Method?

Answer 20

• Operating Activity
• As an Addition/Deduction to Net Income
• Since it was originally deducted from Net Inc, so a Decrease in Amort. Discount would ‘Add’ back into Net Inc.

Question 21

Under IFRS, Interest RECEIVED during a period is reported on the statement of CF in?

Answer 21

• Operating or Investing Cash Flow

Question 22

Under IFRS, Interest/Dividends PAID during a period is reported on the statement of CF in?

Answer 22

• Operating or Financing Cash Flow