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PRACTICE STATEMENT OF CASHFLOWS FREE

The first thing that we need to realize is that profit is not the same as the change in cash. The following income statement and current sections of the balance sheet are for Capstone, Inc.And now it's time to introduce the third financial statement, the Cash Flow Statement. Operating Activities Section Using the Indirect Method. Cash payments to shareholders for dividends.Cash receipts from the collection of principal on loans made to other entities.Cash receipts from the collection of interest on loans made to other entities.Cash payments for the purchases of merchandise.

Cash payments for the repurchase of common stock.The following income statement and current sections of the balance sheet are for Donzi, Inc. Cash payments for the purchase of equipment.Cash receipts from the sale of a building.Cash receipts from the sale of common stock.Briefly explain your answer for each item. Identify whether each of the following items would appear in the operating, investing, or financing activities section of the statement of cash flows. Why did the CEO state, “We probably should have financed the equipment rather than having paid for it all at once”?Ĭlassifying Cash Flows.Why was the CEO concerned about the company’s cash flow?.Refer to the dialogue at Home Store, Inc., presented at the beginning of the chapter and the follow-up dialogue after Note 12.25 "Review Problem 12.7". Describe the adjustment rules used to convert cost of goods sold to cash payments to suppliers.Įvaluating Cash Flows at Home Store, Inc. Assume you are using the direct method to prepare the operating activities section of the statement of cash flows. Describe the adjustment rule used to convert sales revenue to cash receipts from customers. Describe how the indirect method differs from the direct method.

PRACTICE STATEMENT OF CASHFLOWS FREE

How is free cash flow calculated, and what does it tell the user?.How is the capital expenditure ratio calculated, and what does it tell the user?.How is the operating cash flow ratio calculated, and what does it tell the user?.Describe how these transactions are disclosed in the financial statements. Provide an example of a noncash investing or financing activity.

Describe where this increase should be shown elsewhere in the financial statements.

You have just completed the statement of cash flows for a company, and the bottom of the statement shows a net increase in cash of $250,000.

Describe the adjustment rules for current assets and current liabilities, and provide one example for each rule.

Assume you are using the indirect method to prepare the operating activities section of the statement of cash flows.

Why is depreciation expense added back to net income using the indirect method of preparing the statement of cash flows?.

Describe the three adjustments necessary to convert net income to a cash basis using the indirect method.

Refer to the Note 12.15 "Business in Action 12.3" Why is the indirect method used by most companies?.

Briefly describe the four steps required to prepare the statement of cash flows using the indirect method.

Which section of the statement of cash flows is widely regarded as the most important? Why?.

Describe the three classifications of cash flows, and provide examples of activities that would appear in each classification.

Why was the statement of cash flows created by the Financial Accounting Standards Board (FASB)?.