Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 3, Problem 4QE
To determine
Discuss as per US Generally Accepted Accounting Principles (GAAP) that in statement of cash flow classifies cash expense of interest under operating activity and cash expense of dividends to shareholders under financing activity.
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Chapter 3 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 3 - Need for a Statement of Cash Flows. The accrual...Ch. 3 - Articulation of the Statement of Cash Flows with...Ch. 3 - Classification of Interest Expense. Under U.S....Ch. 3 - Prob. 4QECh. 3 - Classification of Changes in Short-Term Financing....Ch. 3 - Classification of Cash Flows Related to...Ch. 3 - Treatment of Non-Cash Exchanges. The acquisition...Ch. 3 - Computing Cash Collections from Customers....Ch. 3 - Computing Cash Payments to Suppliers. Lowes...Ch. 3 - Computing Cash Payments for Income Taxes. Visa...
Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting the Statement of Cash Flows. The...Ch. 3 - Interpreting the Statement of Cash Flows. Texas...Ch. 3 - Interpreting the Statement of Cash Flows. Tesla...Ch. 3 - Interpreting the Statement of Cash Flows. Gap Inc....Ch. 3 - Prob. 19PCCh. 3 - Prob. 20PCCh. 3 - Interpreting the Statement of Cash Flows....Ch. 3 - Extracting Performance Trends from the Statement...Ch. 3 - Interpreting a Direct Method Statement of Cash...Ch. 3 - Prob. 24PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 26PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 1AICCh. 3 - Prob. 1BICCh. 3 - Prob. 1CICCh. 3 - Prob. 1DICCh. 3 - Prob. 1EICCh. 3 - Prob. 1FICCh. 3 - Prob. 1GICCh. 3 - Prob. 1HICCh. 3 - Prob. 2AICCh. 3 - Prob. 2BICCh. 3 - Prob. 2CICCh. 3 - Prob. 2DICCh. 3 - Prob. 2EICCh. 3 - Prob. 2FICCh. 3 - Prob. 3IC
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- Is there any significance that can be attributed to whether net cash flows are generated from operating activities, versus investing and/or financing activities? Explain.arrow_forwardNote payments reduce cash and are related to long-term debt. Do these facts automatically lead to their inclusion as elements of the financing section of the statement of cash flows? Explain.arrow_forwardPlease answer the True/False questions below to the best of your knowledge. Under IFRS, a company may classify expenses by function, but must also disclose the classification of expenses by nature. Although the presentation formats for the balance sheet and statement of cash flows are similar under IFRS and U.S. GAAP, IFRS requires far more extensive disclosure. One significant difference between a balance sheet prepared using IFRS rather than U.S. GAAP is that long-term tangible assets may be reported at fair value rather than historical cost. Both IFRS and U.S. GAAP require that specific items be reported on the balance sheet. Both IFRS and U.S. GAAP require current assets to be listed first on the balance sheet. IFRS does not intend to issue detailed guidance on the selection of a discount rate when the time value of money is required to determine cash flows. Under IAS 37 and the establishment of estimate provisions, discounting is…arrow_forward
- U.S. GAAP designates cash outflows for interest payments and cash inflows from interest and dividends receivedas operating cash flows. Dividends paid to shareholders are classified as financing cash flows. How are thesecash flows reported under IFRS?arrow_forwardHow does AF classify interest paid, interest received, and dividends received in itsstatement of cash flows? What other alternatives, if any, does the company have forthe classification of these items? How are these items classified under U.S. GAAP?arrow_forwardThere are more similarities than differences between income statements and statements of cash flowsprepared according to U.S. GAAP and those prepared applying international standards. In a statement of cash flows, some differences are possible in the classifications of interest and divided revenue, interestexpense, and dividends paidarrow_forward
- Which of the following is not a source of funds for immediate liquidity purposes? a. Proceeds from an IPO. b. Sale of liquid assets such as T-bills. c. Funds borrowed on the money market. d. Excess cash above regulatory reserve requirementsarrow_forwardWhich statement is incorrect? A. An entity shall report cash flows from operating activities either using direct or indirect method. B. Interest payments to lenders should be classified as cash outflows for financing activities. C. Cash receipts from commissions and other revenues are cash flows from operating activities. D. The aggregate cash flows arising from acquisition of subsidiary should be classified as investing activities.arrow_forwardWhich of the following returns is consistent with contractual cash flows that are SPPI? Return for passage of time. Return for the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Return for the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Return for amounts to cover expenses and a profit margin. Group of answer choices I, II and III only I and IV only I, II, III and IV II and III onlyarrow_forward
- Which of the following returns is consistent with contractual cash flows that are solely payments of principal and interest or SPPI? I. Return of passage of time II. Return for the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation III. Return for the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset IV. Return for amounts to cover expenses and a profit margin a. I, II, III, and IV b. I, II, and III c. I and IV only d. II and III onlyarrow_forwardConsistent with U.S GAAP, we classify cash flows as operating, investing, or financing activities under IFRS. However, with regard to interest and dividend inflows and outflows, IFRS a. permits companies to report cash outflows from interest payments as either operating or investing cash flows. b. permits companies to report cash inflows from interest and dividends as either operating or financing cash flows. c. permits companies to report dividends paid as either financing or operating cash flows. d. requires companies to report cash outflows for interest payments and cash inflows from interest and dividends received as operating cash flows.arrow_forwardDiscuss the primary differences between U.S. GAAP and IFRS with respect to the income statement, statement of comprehensive income, and statement of cash flows.arrow_forward
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