AC 232 Chapter 16
98% of 2mill is 1.6mill
A corp issued 2k of bonds at 98. How would the transaction be reported on the statement of cash flows?
Because it indirectly affects cash flow...it is recorded in a separate section of the SCF, usually at the bottom
A corporation issued 2k of,common stock in exchange for 2k of fixed assets. Where would this transaction be recorded?
Decrease cash from FA
Acquisition of treasury stock
OA
Amortization expense
Increase cash from OA
Amortization of intangible assets
Non cash assets; OA
Depreciation and amortization are examples of what and therefore reported where?
The cash flows from the operating section
Depreciation of factory equipment would be reported in the statement of cash flows prepared by the indirect method in
Non cash investing and financing supplement
Exchange of land for common stock
Reconciling item on OA so decrease
Gain in sale of investments
Increases
If an OA asset decreases, the cash flow...
Decreases
If an OA asset increases, the cash flow...
Decreases
If an OA liability/equity decreases, cash flow
Increases
If an OA liability/equity increases, cash flow....
Easier to prepare
What are the major advantages of the indirect method of reporting cash flows from OA?
Difficult to prepare
What is the principal disadvantage of the direct method of reporting cash flows from operating activities?
Financing activities
When you pay dividends, that's what?
Direct method
Which method is easier to understand but difficult to prepare
Operating activities
Transactions associated with the revenues and expenses
Financing activities
Treasury stock, bonds, and bank loans are examples of
Financing activities
Cash is obtained or repaid to owners or creditors
OA
Cash receipts from interest and dividends are classified as
Target number
Change during the period in cash and cash equivalents is the ...
Decrease in OA
Increase in accounts payable
Decrease in OA
Increase in accounts receivable
Operating activities
Interest expense and receipt of dividends are always what? 2 big exceptions
FA
Issuance of the company's stock
F
Issued bonds
F
Issued common stock
F
Issued preferred stock
Indirect method
Most used, starts with net income
O
Net income
OA
Net income
Order of the classification
Operating, investing, financing
F
Paid cash dividends
Decrease FA
Payment of dividends
FA
Payment of dividends
Investing activities
Purchase and sale of long term assets, intangible assets, and long term notes receivable
Decrease IA
Purchase of equipment
IA
Purchase of equipment
I
Purchased buildings
I
Purchased patents
F
Purchased treasury stock
OA
Receipt of dividends
F
Redeemed bonds
Decrease cash from FA
Repayment of long term nite payable
Increase cash for IA
Sale of land
I
Sold equipment
I
Sold long term investments