Question

In: Accounting

The statement of cash flows: a. Must be prepared on a daily basis. b. Summarize the...

The statement of cash flows:

a. Must be prepared on a daily basis.

b. Summarize the operating, investing, and financing activities of an entity.

c. Is another name for the income statement.

d. Is a special section of the income statement.

e. None of the above.

Solutions

Expert Solution

Answer:- The statement of cash flows: Summarize the operating, investing, and financing activities of an entity (Option b).

Explanation:- Cash flows are classified as operating, investing, or financing activities on the statement of cash flows, depending on the nature of the transaction. Each of these three classifications is defined as follows.

1)-Operating activities include cash activities related to net income. For example, cash generated from the sale of goods (revenue) and cash paid for merchandise (expense) are operating activities because revenues and expenses are included in net income.

2)-Investing activities include cash activities related to noncurrent assets. Noncurrent assets include (a) long-term investments; (b) property, plant, and equipment; and (c) the principal amount of loans made to other entities. For example, cash generated from the sale of land and cash paid for an investment in another company are included in this category. (Note that interest received from loans is included in operating activities.)

3)-Financing activities include cash activities related to noncurrent liabilities and owners’ equity. Noncurrent liabilities and owners’ equity items include (a) the principal amount of long-term debt, (b) stock sales and repurchases, and (c) dividend payments. (Note that interest paid on long-term debt is included in operating activities.)


Related Solutions

The statement of cash flows must be prepared before the balance sheet is prepared. True False
The statement of cash flows must be prepared before the balance sheet is prepared. True False
Problem #1 Statement of Cash Flows The following Statement of Cash Flows was prepared for the...
Problem #1 Statement of Cash Flows The following Statement of Cash Flows was prepared for the Baines Corporation. Walker Corporation Statement of Sources and Uses of Cash Year Ended December 31, 2017 Sources of cash                       Net income $111,000                         Depreciation and depletion                                                                               70,000                         Increase in long-term debt 179,000                         Changes in current receivables and inventories,                         less current liabilities 14,000 $374,000 Uses of cash                       Cash dividends $ 60,000                         Expenditure for property, plant, and equipment 214,000...
The statement of cash flows is not prepared the same as theincome statement or balance...
The statement of cash flows is not prepared the same as the income statement or balance sheet. The statement of cash flows requires that the net income must be converted from an accrual basis to a cash basis. This statement can be prepared in either of two ways - the Indirect method or the Direct method.What is the difference between preparing one compared to the other - and which do you feel is a better way to prepare this statement?Your...
WHAT IS A STATEMENT OF CASH FLOWS? WHEN IS THE STATEMENT PREPARED? WHAT IS THE PURPOSE...
WHAT IS A STATEMENT OF CASH FLOWS? WHEN IS THE STATEMENT PREPARED? WHAT IS THE PURPOSE OF THE STATEMENT? NAME THREE ACTIVITIES LISTED UNTER THE STATTEMENT. FOR EACH ACTIVITY, WRITE ANY TWO CASH FLOWS THAT EITHER ARE ADDED OR SUBTRACTED. DETAIL WHETHER IT IS AN ADDITION OR SUBTRACTION.
On the statement of cash flows prepared by the indirect method, a $50,000 gain on the...
On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be: Select one: a. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities. b. added to net income in converting the net income reported on the income statement to cash flows from operating activities. c. added to cash received from the sale to determine cash flows from investing activities....
The following statement of cash flows for Shasta Inc. was not correctly prepared. The cash balance...
The following statement of cash flows for Shasta Inc. was not correctly prepared. The cash balance at the beginning of the year was $240,000. All other amounts are correct, except the cash balance at the end of the year. Shasta Inc. Statement of Cash Flows For the Year Ended December 31, 20Y9 Cash flows from operating activities: Net income $360,000 Adjustments to reconcile net income to net cash flow from operating activities:    Depreciation 100,800    Gain on sale of investments 17,280...
Cash flows case: (indirect method). Messi Company has not yet prepared the statement of cash flows....
Cash flows case: (indirect method). Messi Company has not yet prepared the statement of cash flows. The Balance sheet as of December 31, 2017 and January 1, 2017 and the additional information regarding the statement of income and retained earnings for the year are presented below. Messi Company Comparative Balance Sheet (Dollars in Millions) Assets                                                                  12/31/2107                              1/1/2017     Current Assets:             Cash                                                                $   98                                     $ 158             Account Receivables                                      1,290                                      1,160            ...
How is the statement of cash flows prepared? What information is used when preparing the statement...
How is the statement of cash flows prepared? What information is used when preparing the statement of cash flows? Cite any references used. Participate in follow-up discussion by reviewing your classmates' posts, adding additional information, asking questions, or responding to follow-up questions posed by your instructor.
How is the statement of cash flows prepared? What information is used when preparing the statement...
How is the statement of cash flows prepared? What information is used when preparing the statement of cash flows?
a statement of cash flows can be prepared by using the information in the accrual based...
a statement of cash flows can be prepared by using the information in the accrual based income statement and balance sheet by with the effect of ______ - cash transaction removed.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT