Cash Flows Flashcards
T Bill
The U.S. Treasury bill is considered to be a cash equivalent item so purchasing the T-bill merely changes the form of cash held, it does not change the cash position of the entity. Thus, the purchase is not reported on the statement of cash flows.
The following are required disclosures of a statement of cash flows under the direct method under U.S. GAAP.
a. The major classes of gross cash receipts and gross cash payments.
b. The amount of income taxes paid.
c. A reconciliation of net income to net cash flow from operations.
Disclosed as Supplemental information
Conversion of debt to equity should be disclosed as supplemental information in the statement of cash flows.
Cash flow per share should not be disclosed.
Primary Purpose of statement of Cash flows
The primary purpose of a statement of cash flows is to provide relevant information about the cash receipts and cash disbursements of an enterprise during an accounting period.
In a statement of cash flows, if used equipment is sold at a gain
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 plus the gain.
Indirect method gain of equipment
In a statement of cash flows using the indirect method, gain from the sale of used equipment for cash should be reported in operating activities as a deduction from income.
amortization of bond discount on long-term debt be reported in a statement of cash flows prepared using the indirect method?
Bond discount amortization is a non-cash item that increases interest expense and therefore decreases net income. When preparing the statement of cash flows using the indirect method, the amortization of a bond discount should be eliminated by adding the amount back to net income in the operating section.
Under IFRS, interest received during a period is reported on stmt of CF
Under IFRS, interest (and dividends) received may be reported in either operating cash flow or in investing cash flow. Under U.S. GAAP, interest (and dividends) received must be reported in operating cash flow because interest (and dividend) income is reported on the income statement.
Under IFRS, DIV paid during a period is reported on stmt of CF
Under IFRS, dividends paid may be reported in either operating cash flow or in financing cash flow. Under U.S. GAAP, dividends paid must be reported in financing cash flow because dividends are paid on equity and are not reported on the income statement
Investing Activity on Stmt of CF ?
Loans to other entities and the consequent collection of the loans are reflected in the investing activity section of the cash flow statement.
Investing Activity on Stmt of CF ?
The purchase and sale of property, plant, and equipment will fall under cash flow from investing.
In order to improve its operating cash flow to total debt ratio, a firm reporting under IFRS will classify:
Under IFRS, dividends paid can be classified as CFF or CFO. The operating cash flow to total debt ratio will be improved by classifying dividend payouts as CFF.
Under IFRS, a company that receives in interest and pays dividends may show which of the following on its cash flow statement?
Interest received can be classified as CFO or CFI. Dividends paid can be classified as CFO or CFF. If both interest received and dividends paid are classified as CFO, the net inflow would be 95,000.
Operating CF indirect
Gains on the sale of plant assets are an adjustment to net income in the operating section of a cash flow statement since they are included in net income but do not affect operating cash receipts and disbursements.
Bear sold equipment with a carrying value of $500,000 for cash of $400,000. How should Bear report the transaction in the operating and investing activities sections of its statement of cash flows?
Cash flows from the sale of noncurrent assets are included in investing activities. Bear will have recognized a $100,000 loss in net income. Using the indirect method to prepare the statement of cash flows, the $100,000 will be an addition to net income to arrive at net cash flows from operating activities. The $400,000 received in cash will be recorded as a cash inflow from investing activities.
