ACCT 2300 Chapter 12

Decrease in current asset

Add to net income in the operating activity section of a cash flow statement using the indirect method.

Depreciation expense

Add to net income in the operating activity section of a cash flow statement using the indirect method.

Increase in current liability

Add to net income in the operating activity section of a cash flow statement using the indirect method.

Losses

Add to net income in the operating activity section of a cash flow statement using the indirect method.

What is a cash equivalent?

An investment readily convertible to a known amount of cash with a maturity to the investor of three months or less.

The last dollar amount on a statement of cash flows is the cash balance at the end of the year. Where else can you find this number on the financial statements?

As the cash amount reported on the current year's Balance Sheet.

Name the 3 sections of a cash flow statement in the order they are reported.

Cash flows from Operating Activities Cash flows from Investing Activities Cash flows from Financing Activities

If you were preparing a statement of cash flows using the indirect method in the operating section, where would you find the information to calculate the changes in the current asssets and the current liabilities?

Comparative Balance Sheets

Decrease in current liability

Deduct from net income in the opeating activity section of a cash flow statement using the indirect method.

Gains

Deduct from net income in the opeating activity section of a cash flow statement using the indirect method.

Increase in current asset

Deduct from net income in the opeating activity section of a cash flow statement using the indirect method.

A company purchases a building by signing a note. How would this be reported on the Cash Flow Statement?

Or not reported on the Cash Flow Statement

A company purchases a cash equivalent with cash. How would this be reported on the Cash Flow Statement?

Or not reported on the Cash Flow Statement

One of the lines on a cash flow statement is the net increase (decrease) in cash and is calculated by adding the cash flows from operating, investing and financing activities together. How can you verify this number from another source?

The difference between last year's reported cash and this year's reported cash on comparative Balance Sheets.

What is the purpose of the statement of cash flows?

To provide information about a company's cash inflows and outflows.

Investing activities are concerned with ____________________ and normally relate to _______________ accounts .

acquisition and diposal of long-term assets, long-term asset

Operating activities are concerned with the ______________________________________ and ususally relate to an increase or decrease in a ______________ or a ________________ account.

acquisition and sale of products and services, current asset, current liability

Under accrual accounting, cash flow from operating activities and net income are the same thing.

false

If you were preparing the statement of cash flows, where could you find this number so you could report it in the operating section?

income statement

A company purchases a building with cash. How would this be reported on the Cash Flow Statement?

investing, outflow

The cash flows from operating activities are the cash effects of transactions that enter into the determination of

net income

Using the indirect method of reporting the cash flows from operating activities, what will be the first dollar amount reported in the operating section?

net income

Financing activities are concerned with the ___________________________________ and normally relate to long-term liability and stockholders' equity accounts.

raising and repaying of funds in the form of debt and equity