statement of cash flows

Question 1

an increase in rent receivable does what to deferred income tax liability?

Answer 1

It increases deferred tax liability, because we increases the amount of rent that we will receive now to the future (when it will be tax)

Question 2

What is overstated?

Answer 2

When the reported amount is MORE than the actual amount.

MEANING we should DECREASE the amount that is overstated

Question 3

Steps on preparing statement of cash flows using indirect method

Answer 3

1) Start with Net Income
2) Adjust for Non-cash items (like adding depreciation - because it doesn’t involve actual cash outflow)
3) adjust for gains or losses on sales of assets
4) changes in working capital (like increase in AR, or decrease in AP)

Question 4

What you should know about working capital items in the statement of cash flows?

Answer 4

Increase of current asset items should be deducted from net income
Decrease of current asset items adds to net income

Increase of current liabilities items adds to net income
Decrease of current liabilities items subtract from net income

Question 5

Types of transactions in the operating activities under the Statement of cash flows

Answer 5

Revenue from Sales of Goods or Services
Purchase of Inventory
Employee Salaries and Wages
Receipt (getting) of Interest and Dividends
Payment of Interest

Question 6

Types of transactions in the investing activities under the Statement of cash flows

Answer 6

Purchase (buying) of fixed assets (equipment, buildings, etc.)
Sale of fixed assets

Question 7

Types of transactions in the financing activities under the Statement of cash flows

Answer 7

Payment of Dividends
Issuance (buying) of Equity or Debt
Repayment of Loans

Question 8

noncontractual asset disclosures include

Answer 8

nature of the asset
the quality of the asset
the location of the asset
future cash flows
relation to other line items