Chapter 14: Q4RQ (page 768)
Question: What types of transactions are reported in the non-cash investing and financing activities section of the statement of cash flows?
Answer
The non-cash investing and financing activities record those transaction which does not involve cash
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Identifying and reporting non-cash transactions
Dirtbikes, Inc. identified the following selected transactions that occurred during the year ended December 31, 2018:
Identify any non-cash transactions that occurred during the year, and show how they would be reported in the non-cash investing and financing activities section of the statement of cash flows
Question: Big Island, Inc. began 2018 with cash of \(40,000. During the year, Big Island earned revenue of \)200,000 and collected \(120,000 from customers. Expenses for the year totaled \)160,000, of which Big Island paid \(65,000 in cash to suppliers and \)80,000 in cash to employees. The company received \(2,000 cash for interest revenue and paid \)10,000 for income taxes. Big Island also paid \(35,000 to purchase equipment and a cash dividend of \)15,000 to its stockholders during 2018. Prepare the company’s operating activities section of the statement of cash flows for the year ended December 31, 2018. Use the direct method.
Moss Exports is having a bad year. Net income is only \(60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Moss’s accounts receivable are ballooning. The company desperately needs a loan. The Moss Exports Board of Directors is considering ways to put the best face on the company’s financial statements. Moss’s bank closely examines cash flow from operating activities. Daniel Peavey, Moss’s controller, suggests reclassifying the receivables from the slow-paying clients as long-term. He explains to the board that removing the \)80,000 increase in accounts receivable from current assets will increase net cash provided by operations. This approach may help Moss get the loan.
Requirements
Question: What accounts on the balance sheet must be evaluated when completing the investing activities section of the statement of cash flows?
Question: Preparing the statement of cash flows—direct method The income statement and additional data of Value Corporation follow:
Prepare Value Corporation’s statement of cash flows for the year ended June 30, 2018. Use the direct method.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
