Chapter 16 - Reporting the Statement of Cash Flows

Operating

Receipt of cash dividends from investments is a __________ activity.

Subtracted

Revenues and gains with no cash inflows are ________ from net income.

analyze increase or decrease in cash, operating activities, investing activities, financing activities

Statement of Cash Flows order

Statement of Cash Flows

Statement used to report cash receipts (inflows) and cash payments (outflows) during a period.

Free cash flow

The amount of operating cash flow remaining after replacing current productive capacity and maintaining current dividends

F

The purchase of long-term assets using a long-term note payable affects cash receipts or payments. T or F?

accounts relating to investing activities are

a. investments b. land c. building d. plant and equipment e. other long-term assets

accounts relating to financing activities are

a. mortgage payable b. long term debt c. dividends payable d. capital stock

accounts relating to operating activities are

a. net income from operations b. depreciation/ amortization c. accounts receivable d. inventory e. supplies f. prepaid expenses g. accounts payable h. salaries payable i. taxes payable j. gain/loss on the sale of investments

Cash flows from financing activities

includes all cash transactions from debt and stock including dividends . cash flows from transactions that affect the equity and debt of the business

Cash flows from investing activities

includes all cash transactions from investments, plant assets, and other non-current assets. cash flows from transactions that affect the investments and noncurrent assets

Cash flows from operating activities

includes all cash transactions that enter into the determination of income from operations. cash flows from transactions that affect net income

Cash flow per share

normally computed as cash flow from operations per share

3

A debt security must be within _____ months of its maturity to satisfy the cash equivalent criteria.

Direct method

A method of reporting the cash flows from operating activities as the difference between the operating cash receipts and the operating cash payments

Indirect method definition

A method of reporting the cash flows from operating activities as the net income from operations adjusted for all deferrals of pas cash receipts and payments and all accruals of expected future cash receipts and payments.

Investing

A sale of plant assets is part of _______ activities

Statement of cash flows

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year

Investing Activities

Activities that include those transactions and events that affect long-term assets-namely, the purchase and sale of long-term assets. Includes the purchase and sale of short-term investments in the securities of other entities, except trading securities, and lending and collecting money for notes receivable.

Financing activities

Activities that include those transactions and events that affect long-term liabilities and equity. Such as obtaining cash from issuing debt and repaying the amounts borrowed and receiving cash from or distributing cash to owners.

Operating activities

Activities whose transactions and events that determine net income.

Operating

Cash collections from customers is a __________ activity.

Operating, investing, and financing activities

Cash flow categories

Indirect method

Method of reporting net income and then adjusting it for items necessary to obtain net cash provided or used by operating activities.

Direct Method

Method of separately listing each major item of operating cash receipts (such as cash received from customers) and each major item of operating cash payments (such as cash paid for inventory).

Financing

Note payable issued for cash is a __________ activity.

current assets and current liabilities

Operating activities, besides being affected by the income statement, are also affected by changes in _________ and _________.

Investing

Purchase of equipment for cash is a __________ activity.

No cash effect

Items such as depreciation, amortization, and depletion have ______ _______ _______.

does not

Cash flows ______ report transactions between cash and cash equivalents.

Cash and Cash Equivalents

Cash flows are defined to include both _____ and _______

noncurrent, current

Cash flows from investments are computed by identifying all _________ asset accounts and the ______ accounts for both notes receivable and investments in securities (excluding trading securities).

Operating

Cash paid for utilities is a __________ activity.

Investing

Cash paid to acquire investments is a __________ activity.

Financing

Cash paid to retire debt is a __________ activity.

Operating

Cash payment of wages is a __________ activity.

Operating

Cash received as interest on investments is a __________ activity.

Financing

Cash received from a bank loan is a __________ activity.

Investing

Cash received from selling investments is a __________ activity.

Added

Decreases in current assets are ______ to net income.

subtracted

Decreases in current liabilities are _______ from net income.

added back

Expenses and losses with no cash outflows are____ ____ to net income

Long-term liabilities and equity

Financing activities are affected by changes in _________ and _________.

subtracted

Increases in current assets are ______ from net income.

added

Increases in current liabilities are _____ to net income.

long-term assets

Investing activities are affected by changes in _________.

Financing

Issuance of stock for cash is a __________ activity.