Statement of Cash Flows

These flashcards cover key concepts related to the Statement of Cash Flows.

The statement of cash flows shows __ for a business.

cash flows

Cash flows from the firm's core business are classified as __ activities.

operating

Cash activities related to investments that the firm makes are classified as __ activities.

investing

Cash activities related to how the firm finances its operations are classified as __ activities.

financing

Dividends paid to shareholders are classified as __ activities.

financing

The Indirect method of computing cash flows starts with __.

Net Income

The Direct method lists the __ and the uses of cash.

sources

Negative cash flows from __ are difficult to justify.

operations

Changes in the Investing and Financing sections of cash flows can provide __.

informative insights

The FASB prefers the __ method due to its focus on cash.

Direct

In the Indirect method, we adjust Net Income for __ expenses.

Non-Cash Operating

Increases in current liabilities will result in a __ in cash flow from operations.

increase

Changes in deferred tax assets and liabilities can influence tax _.

expense

When calculating cash flows, dividends paid are not seen in the __ section.

operating

accruals accurately capture ___ performance

economic

Dividends Received

Operating

Interest Received

Operating

Interest Paid

Operating

If it is on the income statement it is ___

Operating

What is NOT the purpose of a statement of cash flows?

to explain what the cash balance is

what is the purpose of the statement of cash flows?

to explain HOW cash changed from X to Y during a given period of time

what is the focus of the indirect method

not cash

what is the focus of the direct method

cash

an increase in a current asset account will result in a ___ in cash flow from operations

decrease

do you add or subtract depreciation expense in the indirect method

Add

do you add or subtract gains in the indirect method

Subtract

do you add or subtract losses in the indirect method

Add

do you add or subtract stock based compensation in the indirect method

Add

what account do we look at for A/R write-offs in the direct method

debits to ADA

how do we treat Net A/R in the indirect method?

as a current asset

how do we treat A/R and ADA under the indirect method?

A/R = Current Asset; ADA = Current Liability

You ___ the discount

deduct

You ____ the premium

Plus

if issued at a premium, Interest Expense __ Cash Paid

<

if issued at a discount, Interest Expense __ Cash Paid

>

under the direct method what is the JE for premiums at issuance

Dr. Cash

Cr. Bonds Payable

Cr. Premium

under the direct method what is the JE for premiums when expense is being reported

Dr. Interest Expense

Dr. Premium

Cr. Interest Payable

under the direct method what is the JE for discounts at issuance

Dr. Cash

Dr. Discount

Cr. Bonds Payable

under the direct method what is the JE for discounts when expense is being reported

Dr. Interest Expense

Cr. Discount

Cr. Interest Payable

Under the indirect method, how are Interest Payable and Premium treated?

Both treated as Current Liabilities

Under the indirect method, how is Discount treated?

Current Asset

What is the JE for stock-based compensation expense at issuance

Dr. Stock Comp. Expense

Cr. Equity

What is the JE for stock-based compensation expense at exercise

Dr. Cash

Cr. Equity

Under the direct method what is the credit to the Taxes Payable T-Account to find cash paid for taxes?

Tax expense - increase in DTL + increase in DTA

Why do we credit the rearranged Tax Expense equation to the Taxes Payable T-Account?

to find cash paid for taxes

under the indirect method how do you treat DTL

current liability

under the indirect method how do you treat Taxes Payable

Current Liability

under the indirect method how do you treat DTA

Current Asset

Gains and losses on sale of PP&E involves cash, but is NOT a(n) ____ activity.

operating

Under the direct method, how do you solve for cash from sale in a JE

Dr. A/D

Dr. Cash

Cr. PP&E

Cr. Gain