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Concept Introduction: A cash flow statement is prepared to determine
The statement of cash flow using a direct method for reporting operating activity.
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Concept Introduction: A cash flow statement is prepared to determine cash inflow and outflow during a year. The cash flow statement is classified into three categories: cash flow from operating activity represents cash flow on account of main business operations, cash flow from investing activity represents cash flow from acquisition and disposition of long-lived assets, and cash flow from financing activity represents cash flow on account of borrowing, repayments of debt and issue of a share, payments of dividends.
The statement of cash flow using an indirect method for reporting operating activity.
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- Delineate each type of adjustment to net income for calculating cash flows from operating activities in the indirect method and provide an example of each type of adjustment. Explain the difference between a simple and complex capital structure as the terms are used in the calculation of earnings per share (EPS). Use minimum two in text citation that matches peer reviewed referencesarrow_forwardDefine the following operating activities, investing activities, and financing activities as they relate to cashflow statements, as well as examples under each of thesearrow_forwardMatch each of the following term with the corresponding description. Not all descriptions will be used._____ Operating activities_____ Indirect method_____ Cash equivalent_____ Investing activities_____ Direct method_____ Financing activitiesA. Measures the percent of net income that comes from high-margin products.B. Includes such events as the receipt of dividends and interest on investment assets.C. Includes assets that are very liquid and have original maturities of three months or less.D. The percent of total debt represented by a company's cash account.E. These activities include only purchases made with borrowed funds.F. Where cash flows from operating activities are calculated by converting each revenue and expense item from an accrual to a cash basis.G. This ratio multiplies net income by the average rate of interest the company receives on its investments.H. This ratio uses net income instead of operating cash flow to Analysis a company's ability to finance the cost of its…arrow_forward
- Access the FASB Accounting Standards Codification at the FASB website ( asc.fasb.org ). Determine the specific citation for accounting for each of the following items: 1. Disclosure of interest and income taxes paid if the indirect method is used. 2. Primary objectives of a statement of cash flows. 3. Disclosure of noncash investing and financing activities.arrow_forwardDescribe some of the key considerations and challenges involved in preparing and presenting the cash flow statement, including issues related to accounting standards, financial reporting requirements, and management judgments and estimates.arrow_forwardIdentify the section of the statement of cash flows (a–d) where each of the following items would be reported.a. Operating activitiesb. Financing activitiesc. Investing activitiesd. Schedule of noncash financing and investing Increase in income taxes payable Where does this will be on the cash flow statement ?arrow_forward
- Which of the following is included in the cash flows from financing activities section of the statement of cash flows? Multiple Choice Purchase of investments. Interest expense. Purchase of treasury stock. Sale of equipment. Interest revenue.arrow_forwardDiscuss the type of questions about future cash flows that investors and creditors attempt to answer in so far as it relates to the information contained in the income statementarrow_forwardThe Financial Accounting Standards Board prefers companies to use this method to prepare the operating section on their statement of cash flows: Group of answer choices the direct method the weighted-average method the indirect method the straight-line methodarrow_forward
- Which of the following statements are needed for analysis when preparing the statement of cash flows? beginning and ending balance sheets income statement shareholders' equity or retained earnings statement all of these choicesarrow_forwardComparative balance sheets, an income statement, and additional information follow. 1. Prepare a statement of cash flows using the indirect method for year 2019. 2.B Prepare a statement of cash flows using the direct method for year 2019.arrow_forwardCalculate the following for 2019: i. Operating Cash Flow ii. Net Capital Spending iii. Change in Net Working Capital iv. Cash Flow from Assets v. Cash Flow to Creditors vi. Cash Flow to Stockholdersarrow_forward
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