Essay Wiley Plus Chapter 12 Answers

1726 Words Dec 17th, 2014 7 Pages
*Chapter 12
Questions
1. (a) What is a statement of cash flows?
The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of a company during a period in a format that reconciles the beginning and ending cash balances
(b) Mark Paxson maintains that the statement of cash flows is an optional financial statement. Do you agree? Explain.
Disagree. The statement of cash flows is required. It is the fourth basic financial statement.
2. What questions about cash are answered by the statement of cash flows?
The statement of cash flows answers the following questions about cash: (a) Where did the cash come from during the period? (b) What
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How should they be disclosed?

The statement of cash flows presents investing and financing activities so that even noncash transactions of an investing and financing nature are disclosed in the financial statements. If they affect financial conditions significantly, the FASB requires that they be disclosed in either a separate schedule at the bottom of the statement of cash flows or in a separate note or supplementary schedule to the financial statements.

6. Diane Hollowell and Terry Parmenter were discussing the format of the statement of cash flows of Snowbarger Co. At the bottom of Snowbarger's statement of cash flows was a separate section entitled “Noncash investing and financing activities.” Give three examples of significant noncash transactions that would be reported in this section.

Examples of significant noncash activities are: (1) issuance of stock for assets, (2) conversion of bonds into common stock, (3) issuance of bonds or notes for assets, and (4) noncash exchanges of property, plant, and equipment.

7. Why is it necessary to use comparative balance sheets, a current income statement, and certain transaction data in preparing a statement of cash flows?

Comparative balance sheets, a current income statement, and certain transaction data all provide information necessary for preparation of the statement of cash flows. Comparative balance sheets indicate how assets, liabilities, and

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