Chapter 23: Q4IFRS (page 1399)

Stan Conner and Mark Stein were discussing the statement of cash flows of Bombeck Co. In the notes to the statement of cash flows was a schedule entitled “Non-cash investing and financing activities.” Give three examples of significant non-cash transactions that would be reported in this schedule.

Short Answer

Expert verified

Examples of Non-cash transactions are as follows:

Issuing shares in exchange for non-cash assets;
Issuing shares to pay off debt;
Issuing bonds or notes in exchange for non-cash assets.

Step by step solution

Meaning of Financing activities

A trade’s net financing over a particular period is considered financing activities. The issuing and reimbursement of values, the payment of profits, the issuance and reimbursement of obligations, and capital rent obligations are all examples of financial activity.

Explanation on non-cash investing and financing activities

Non-cash investing and financing transactions are the transactions are the transactions that are engaged in financing and investing activities, without any change in the cash flows. It is reported separately under the schedule of “Non-cash investing and financing activities”.

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Debits	December 31
	2017	2016
Cash	\(35,000	\)32,000
Accounts receivables	33,000	30,000
Inventory	31,000	47,000
Property, plant and equipment	100,000	95,000
Unamortized bond discount	4,500	5,000
Cost of goods sold	250,000	380,000
Selling expenses	141,500	172,000
General and administration expenses	137,000	151,300
Interest expenses	4,300	2,600
Income tax expenses	20,400	61,200
	\(756,700	\)976,100

Credits	December 31
	2017	2016
Allowance for doubtful accounts	\(1,300	\)1,100
Accumulated depreciation – Plant assets	16,500	15,000
Account payable	25,000	15,500
Income tax payable	21,000	29,100
Deferred tax liability	5,300	4,600
8% callable bonds payable	45,000	20,000
Common stock	50,000	40,000
Paid-in-capital in excess of par	9,100	7,500
Retained earnings	44,700	64,600
Sales revenue	538,800	778,700
	\(756,700	\)976,100

(a) Cash collected from customer	(d) Cash paid for income tax
(b) Cash paid to suppliers	(e) Cash paid for selling expenses
(c) Cash paid for interest

LASKOWSKI CO. INCOME STATEMENT
Revenues	\(6,583,000
Operating expenses (excluding depreciation) \)4,920,000
Depreciation expense 880,000	5,800,000
Income before income tax	783,000
Income tax expense	353,000
Net income	\( 430,000

LASKOWSKI CO. COMPARATIVE BALANCE SHEETS (PARTIAL)
	2017	2016
Cash	\(672,000	\)130,000
Accounts receivable	775,000	610,000
Inventory	834,000	867,000
Accounts payable	521,000	501,000

Short Answer

Step by step solution

Meaning of Financing activities

Explanation on non-cash investing and financing activities

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MORTONSON COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2017 (\(000 OMITTED)
Sales revenue		\)3,800
Expenses
Cost of goods sold	\(1,200
Salaries and benefits	725
Heat, light and power	75
Depreciation	80
Property tax	19
Patent amortization	25
Miscellaneous expenses	10
Interest	30	2,164
Income before taxes		1,636
Income tax		818
Net income		818
Retained earnings – Jan 1, 2017		310
		1,128
Stock dividend declared and issued		600
Retained earnings Dec 31, 2017		\)528

MORTONSON COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31 (\(000 OMITTED)
Assets	2017	2016
Current assets
Cash	\)333	\(100
U.S treasury notes (available for sale)	10	50
Accounts receivables	780	500
Inventory	720	560
Total current assets	1,843	1,210

Long-term assets
Land	150	70
Building and equipment	910	600
Accumulated depreciation – building and equipment	(200)	(120)
Patent (less: amortization)	105	130
Total long-term assets	965	680
Total assets	\)2,808	\(1,890

Liabilities and stockholder’s equity
Current liabilities
Account payable	\)420	\(330
Income tax payable	40	30
Notes payable	320	320
Total current liabilities	780	680
Long-term note payable	200	200
Total liabilities	980	880
Stockholder’s equity
Common stock	1,300	700
Retained earnings	528	310
Total stockholder’s equity	1,828	1,010
Total liabilities and stockholder’s equity	\)2,808	$1,890