Question

What are 3 examples of transactions that would not appear in the operating, investing, or financing section but instead, disclosed in a supplemental schedule?

Answer 1

(1). Disclosure at the bottom of the statement of cash flows:

The following presentation shows a schedule of significant non-cash investing and financing activities at the bottom of the statement of cash flows:

(2). Disclosure in a separate note:

The following is an example of the disclosure of significant non-cash investing and financing activities as a separate note to the financial statements:

(3)

Meta company is consistently using indirect method for preparing its statement of cash flows. The comparative balance sheet and some additional information of the company are given below:

Additional information:

• Net income for the year: $500,000.
• Cash dividend declared and paid during the year: $280,000.
• Depreciation expenses for the year: $120,000
• Sold marketable securities for $70,000; the cost was $30,000.
• Acquired plant assets for $200,000. $60,000 paid in cash and a mortgage note payable was issued for the balance.

Required:

1. Prepare a worksheet as a helping tool for the preparation of final statement of cash flows.
2. Prepare a statement of cash flows of Meta company.

Solution:

(1). Worksheet for statement of cash flows:

Notice that the cash effects section provides all information required to prepare a statement of cash flows by indirect method.

(2). Statement of cash flows: