Suppose BO company uses the indirect method to prepare the cash flow statement. Indicate which of...

Suppose BO company uses the indirect method to prepare the cash flow statement. Indicate which of the following items will appear in the cash flow from operating activities section of the cash flow statement. [Tick all that apply].

		Amortization of the cost of an intangible asset
		Cash paid to acquire other companies
		Cash paid to buy bonds issued by another company
		Cash received from sale of company’s own stock
		Dividends received from companies accounted by available-for-sale method
		Income from companies accounted by equity method
		Licensing revenue

Expert Solution

Amortization of the cost of intangible assets is a non cash transaction therefore it will not be noted in cash flow statement.

Cash paid to acquired other company:- show in an investing activities section of cash flow statement because operation of subsidiaries or acquiring of other company is done for purpose of earning through investment in other company.

Cash paid to buy the bond issued by other company :- show in Investing activities section of cash flows statement

Cash received from sale of company own stock :- shows in Financing activities section of cash flow statement.

Dividend received from companies accounted by available for sale method :- Show in Operating activities section ( US GAAP ,ASC 230)

Income from companies accounted by equity method :- Net income of the investee company increases the investor's asset value on its balance sheet .therefore it is an non cash item so it will not show in cash flow statement.

"Licensing revenue" :- is covered under " Cash flow from operating activities section " of cash flow statement.

Explanation:- Licensing revenue are cash revenue which are generated from renting or giving the using right to others of the intangible assets, intellectual property like copyright, patent etc. Its is an operating activities of a business because it not increasing the value of assets but just generating income for business oparation whereas the purchase of intangible asset covered under investing activities section in cash flow statement.

ekkarill92 answered 10 months ago

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