Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Question
Chapter 21, Problem 21.1P
To determine
Statement of
This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
Investing activities:
Investing activities refer to the activities carried out by a company for acquisition of long term assets. The examples for investing activities are purchase of equipment, long term investment, sale of land, and others.
Financing activities:
Financing activities refer to the activities carried out by a company to mobilize funds to carry out the business activities. The examples for financing activities are purchase of bonds, issuance of common shares, and others.
To Classify: The given transactions on the basis of their representation in the statement of cash flow.
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Classifying Items in the Statement of Cash Flows
The following items are commonly reported in a statement of cash flows (indirect method presentation). For each item 1 through 20, determine (a) in which section the item is presented (operating, investing, or financing) and (b) whether the associated dollar amount is added or subtracted in the statement.
(a)
(b)
1. Payments of short-term debt.
AnswerOperatingInvestingFinancing
AnswerAddSubtract
2. Repurchases of common stock.
AnswerOperatingInvestingFinancing
AnswerAddSubtract
3. Purchases of property and equipment.
AnswerOperatingInvestingFinancing
AnswerAddSubtract
4. Sale of investments classified as long-term.
AnswerOperatingInvestingFinancing
AnswerAddSubtract
5. Proceeds from the issuance of common stock.
AnswerOperatingInvestingFinancing
AnswerAddSubtract
6. Increase in prepaid expenses and other current assets.
AnswerOperatingInvestingFinancing
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7. Acquisition for cash of a competitor.…
compare cash fl ows from operating, investing, and fi nancing activities and classify cash fl owitems as relating to one of those three categories given a description of the items
Classifying transactions on the statement of cash flows—indirect method
Consider the following transactions:
Identify the category of the statement of cash flows in which each transaction would be reported.
Chapter 21 Solutions
Intermediate Accounting, 10 Ed
Ch. 21 - Effects of all cash flows affect the balances of...Ch. 21 - Prob. 21.2QCh. 21 - Prob. 21.3QCh. 21 - Prob. 21.4QCh. 21 - Prob. 21.5QCh. 21 - Prob. 21.6QCh. 21 - Prob. 21.7QCh. 21 - The sale of stock and the sale of bonds are...Ch. 21 - Does the statement of cash flows report only...Ch. 21 - Prob. 21.10Q
Ch. 21 - Perhaps the most noteworthy item reported on an...Ch. 21 - Prob. 21.12QCh. 21 - Given sales revenue of 200,000, how can it be...Ch. 21 - Prob. 21.14QCh. 21 - When determining the amount of cash paid for...Ch. 21 - Prob. 21.16QCh. 21 - When using the indirect method of determining net...Ch. 21 - Prob. 21.18QCh. 21 - Prob. 21.19QCh. 21 - Where can we find authoritative guidance for the...Ch. 21 - U.S. GAAP designates cash outflows for interest...Ch. 21 - Prob. 21.1BECh. 21 - Prob. 21.2BECh. 21 - Prob. 21.3BECh. 21 - Prob. 21.4BECh. 21 - Investing activities LO215 Carter Containers sold...Ch. 21 - Financing activities LO216 Refer to the situation...Ch. 21 - Prob. 21.11BECh. 21 - Prob. 21.12BECh. 21 - Classification of cash flows LO213 through LO216...Ch. 21 - Indirect method; reconciliation of net income to...Ch. 21 - Prob. 21.29ECh. 21 - Prob. 21.30ECh. 21 - Prob. 21.31ECh. 21 - Prob. 21.32ECh. 21 - Prob. 21.1PCh. 21 - Research Case 219 FASB codification; locate and...Ch. 21 - IFRS Case 2110 Statement of cash flows...
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Similar questions
- The statement of cash flows classifies all cash inflows and outflows into one of the three categories shown below and lettered from a through c. In addition, certain transactions that do not involve cash are reported in the statement as noncash investing and financing activities, labeled d. a. Operating activities b. Investing activities c. Financing activities d. Noncash investing and financing activities Required: For each of the following transactions, use the letters above to indicate the appropriate classification category. 1. _____ Purchase of equipment for cash. 2. _____ Payment of employee salaries. 3. _____ Collection of cash from customers. 4. _____ Cash proceeds from a note payable. 5. _____ Purchase of common stock of another corporation for cash 6. _____ Issuance of common stock for cash. 7. _____ Sale of equipment for cash. 8. _____ Payment of interest on note payable. 9. _____ Issuance of bonds payable in exchange for land and building. 10. _____ Payment of cash…arrow_forwardClassifying items on the indirect statement of cash flows The statement of cash flows categorizes like transactions for optimal reporting. Identify each item as a(n): • Operating activity—addition to net income (O+) or subtraction from net income (O–) • Investing activity—cash inflow (I+) or cash outflow (I–) • Financing activity—cash inflow (F+) or cash outflow (F–) • Non-cash investing and financing activity (NIF) • Activity that is not used to prepare the indirect statement of cash flows (N) The indirect method is used to report cash flows from operating activities. a. Loss on sale of land. b. Acquisition of equipment by issuance of note payable. c. Payment of long-term debt. d. Acquisition of building by issuance of common stock. e. Increase in Salaries Payable. f. Decrease in Merchandise Inventory. g. Increase in Prepaid Expenses. h. Decrease in Accrued Liabilities. i. Cash sale of land. j. Issuance of long-term note payable to borrow cash. k. Depreciation Expense. l. Purchase of…arrow_forwardRead CA23-5 found in the end of chapter materials of Chapter 23 and answer the related questions. CA23-5. (Purpose and Elements of SCF) GAAP requires the statement of cash flows be presented when financial statements are prepared. Instructions (a) Explain the purposes of the statement of cash flows. (b) List and describe the three categories of activities that must be reported in the statement of cash flows. (c) Identify and describe the two methods that are allowed for reporting cash flows from operations. (d) Describe the financial statement presentation of noncash investing and financing transactions. Include in your description an example of a noncash investing and financing transaction.arrow_forward
- In an statement of cash flows what is included in the operating activities section? In the investment section? In the financial activities section? One or two paragraph minimum per section CH 15arrow_forwardIntermediate Accounting 105 What is the purpose of a statement of cash flows? How does it differ from a balance sheet and an income statement? Please provide GAAP concept and own explanation / example.arrow_forwardClassifying items on the indirect statement of cash flows The statement of cash flows categorizes like transactions for optimal reporting. Identify each item as a(n): Operating activity—addition to net income (O+) or subtraction from net income (O–) Investing activity—cash inflow (I+) or cash outflow (I–) Financing activity—cash inflow (F+) or cash outflow (F–) Non-cash investing and financing activity (NIF) Activity that is not used to prepare the indirect statement of cash flows (N) The indirect method is used to report cash flows from operating activities. Loss on sale of land. Acquisition of equipment by the issuance of note payable. Payment of long-term debt. Acquisition of building by the issuance of common stock. Increase in Salaries Payable. The decrease in Merchandise Inventory. Increase in Prepaid Expenses. The decrease in Accrued Liabilities. Cash sale of land. Issuance of long-term note payable to borrow cash. Depreciation Expense. Purchase of treasury stock. Issuance of…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_forward23. How should significant noncash transactions be reported in the statement of cash flows? They should be incorporated in the statement of cash flows in a section labeled, "Significant Noncash Transactions." They should be handled in a manner consistent with the transactions that affect cash flows. These noncash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials. Such transactions should be incorporated in the section (operating, financing, or investing) that is most representative of the major component of the transaction.arrow_forward
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