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Chapter 12: Q2QS (page 566)

Question:Label the following headings, line items, and notes with the numbers 1 through 13 according to their sequential order (from top to bottom) for presentation of the statement of cash flows.

a. “Cash flows from investing activities” title

b. “For period Ended date” heading

c. “Cash flows from operating activities” title

d. Company name

e. Schedule or note disclosure of noncash investing and financing transactions

f. “Statement of Cash Flows” heading

g. Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . \( #

h. Net cash provided (used) by operating activities . . . . . . . . . . . . \) #

i. Cash (and equivalents) balance at prior period-end . . . . . . . . . \( #

j. Net cash provided (used) by financing activities . . . . . . . . . . . . \) #

k. “Cash flows from financing activities” title

l. Net cash provided (used) by investing activities . . . . . . . . . . . . \( #

m. Cash (and equivalents) balance at current period-end . . . . . . . . \) #

Short Answer

Expert verified

Answer

All the items of the statement of cash flow are labeled in sequence order.

Step by step solution

01

Meaning of Cash Flow Statement

A cash flow statement is a statement prepared by the companies to show the flow of cash, i.e., inflow and outflow, into separate business activities like operating, investing, and financing.

02

Labelling of items in sequence

Cash flow statement items

Sequence No.

a. “Cash flows from investing activities” title

6

b. “For period Ended date” heading

3

c. “Cash flows from operating activities” title

4

d. Company name

1

e. Schedule or note disclosure of noncash investing and financing transactions

13

f. “Statement of Cash Flows” heading

2

g. Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . $ #

10

h. Net cash provided (used) by operating activities . . . . . . . . . . . . $ #

5

i. Cash (and equivalents) balance at prior period-end . . . . . . . . . $ #

11

j. Net cash provided (used) by financing activities . . . . . . . . . . . . $ #

9

k. “Cash flows from financing activities” title

8

l. Net cash provided (used) by investing activities . . . . . . . . . . . . $ #

7

m. Cash (and equivalents) balance at current period-end . . . . . . . . $ #

12

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Most popular questions from this chapter

Classify the following cash flows as either operating (O), investing (I), or financing (F) activities.

1. Sold long-term investments for cash.

2. Received cash payments from customers.

3. Paid cash for wages and salaries.

4. Purchased inventories for cash.

5. Paid cash dividends.

6. Issued common stock for cash.

7. Received cash interest on a note.

8. Paid cash interest on outstanding notes.

9. Received cash from sale of land at a loss.

10. Paid cash for property taxes on building.

What are some investing activities reported on the statement of cash flows?

The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column.

Statement of Cash Flows

S.no.

Operating

Activities

Investing

Activities

Financing

Activities

Noncash

Investing

and Financing

Activities

Not

Reported on Statement

or in Notes

a

Declared and paid a cash dividend

b

Recorded depreciation expense

c

Paid cash to settle long-term note payable

d

Paid cash to settle long-term note payable

e

Accounts receivable decreased in the yea

f

Purchased land by issuing common stock

g

Inventory increased in the year

h

Sold equipment for cash, yielding a loss

i

Accounts payable decreased in the year

j

Income taxes payable increased in the year

Compute cash flows from financing activities using the following company information.

Additional short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . $20,000

Purchase of short-term investments . . . . . . . . . . . . . . . . . . . . . . 5,000

Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

BTN 12-4 Your friend, Diana Wood, recently completed the second year of her business and just received annual financial statements from her accountant. Wood finds the income statement and balance sheet informative but does not understand the statement of cash flows. She says the first section is especially confusing because it contains a lot of additions and subtractions that do not make sense to her. Wood adds, “The income statement tells me the business is more profitable than last year and that’s most important. If I want to know how cash changes, I can look at comparative balance sheets.”

Required

Write a half-page memorandum to your friend explaining the purpose of the statement of cash flows. Speculate as to why the first section is so confusing and how it might be rectified.
See all solutions

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