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Accounting Chapter 21 Homework The Direct Method Reports Specific Operating Cash

Page Count
14 pages
Word Count
3361 words
Book Title
INTERMEDIATE ACCOUNTING WITH AIR FRANCE-KLM 2013 ANNUAL REPORT 8th Edition
Authors
David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
Chapter 21 The Statement of Cash Flows Revisited
QUESTIONS FOR REVIEW OF KEY TOPICS
Question 211
Every cash flow eventually affects the balance of one or more accounts in the
Question 212
The informational value of the presentation is enhanced if the cash flows are
Question 213
No, an investment in Treasury bills need not always be classified as a cash
equivalent. A guidelinenot a rulefor cash equivalents is that these investments
212 Intermediate Accounting, 8/e
Answers to Questions (continued)
Question 214
Transactions that involve merely transfers from cash to cash equivalents such as
the purchase of a three-month Treasury bill, or from cash equivalents to cash such as
Question 215
"Cash flows from operating activities" are both inflows and outflows of cash that
Question 216
The generalization that "cash flows from operating activities" report all the
Answers to Questions (continued)
Question 217
"Cash flows from investing activities" are both outflows and inflows of cash due to
the acquisition and disposition of assets. This classification includes cash payments to
acquire (1) property, plant, and equipment and other productive assets; (2)
Question 218
The payment of cash dividends to shareholders is classified as a financing activity,
Answers to Questions (continued)
Question 219
A statement of cash flows reports transactions that cause an increase or a decrease
in cash. However, some transactions that don’t increase or decrease cash, but which
Question 2110
The acquisition of a building purchased by issuing a mortgage note payable in
Question 2111
Perhaps the most noteworthy item reported on an income statement is net
incomethe amount by which revenues exceed expenses. The most noteworthy item
Answers to Questions (continued)
Question 2112
The spreadsheet entries shown in the two "changes" columns, which separate the
beginning and ending balances, explain the increase or decrease in each account
Question 2113
If sales revenue is $200,000, this does not necessarily mean that $200,000 cash
was received from customers. Amounts reported on the income statement usually do
Question 2114
When an asset is sold at a gain, the gain is not reported as a cash inflow from
216 Intermediate Accounting, 8/e
Answers to Questions (continued)
Question 2115
When determining the amount of cash paid for income taxes, an increase in the
Question 2116
When using the indirect method of determining net cash flows from operating
activities, the net cash increase or decrease from operating activities is derived
Question 2117
When using the indirect method of determining net cash flows from operating
Answers to Questions (continued)
Question 2118
Either the direct method or the indirect method is permitted, but the FASB strongly
encourages companies to report "cash flows from operating activities" by the direct
Question 2119
The direct and indirect methods are alternative approaches to deriving net cash
Question 2120
Question 2121
U.S. GAAP designates cash outflows for interest payments and cash inflows from
interest and dividends received as operating cash flows. Dividends paid to
218 Intermediate Accounting, 8/e
BRIEF EXERCISES
Brief Exercise 211
Summary Entry ($ in millions)
Brief Exercise 212
Summary Entry ($ in millions)
Brief Exercise 213
Summary Entry ($ in millions)
Cost of goods sold 25
Brief Exercise 214
Summary Entry ($ in millions)
Salaries expense 17
Brief Exercise 215
($ in millions)
Interest expense (10% x 1/2 x $380) 19
2110 Intermediate Accounting, 8/e
Brief Exercise 216
($ in millions)
Interest expense (10% x 1/2 x $380) 19
Brief Exercise 217
Merit would report the cash inflow of $41 million from the borrowing as a cash inflow
Brief Exercise 218
($ in millions)
Cash ......................................................... 35
Gain on sale of land (difference) ............ 13
2112 Intermediate Accounting, 8/e
Brief Exercise 219
Cash Flows from Investing Activities:
Proceeds from sale of marketable securities $30
Brief Exercise 2110
Cash Flows from Financing Activities:
Sale of common shares $40
Brief Exercise 2111
Net income $90
Adjustments for noncash effects:
Depreciation expense 3
Brief Exercise 2112
Net income $60
Adjustments for noncash effects:
Amortization expense 2
EXERCISES
Exercise 211
Example F 1. Sale of common stock
I 2. Sale of land
Exercise 212
Requirement 1
($ in millions)
Inventory
_______________________________________
Beginning balance 90
Requirement 2
Summary Entry ($ in millions)
Cost of goods sold 300
2116 Intermediate Accounting, 8/e
Exercise 213
($ in millions)
Situation Sales Accounts Cash received
revenue receivable from
customers
increase
(decrease)
1 100 -0- 100
Exercise 214
Situation Sales Accounts Cash received
revenue receivable from
customers
increase
(decrease)
1 200 -0- 200
Exercise 215
Cost of Accounts Cash paid to
Situation goods sold Inventory payable suppliers
increase (decrease) increase (decrease)
1 100 0 0 100
Exercise 215 (concluded)
Cost of Accounts Cash paid to
Situation goods sold Inventory payable suppliers
increase (decrease) increase (decrease)
6 100 3 7 96
6. Summary Entry Cost of goods sold 100
2120 Intermediate Accounting, 8/e
Exercise 216
Cost of Accounts Cash paid to
Situation goods sold Inventory payable suppliers
increase increase
(decrease) (decrease)
1 200 0 0 200
1. Summary Entry Cost of goods sold 200
2. Summary Entry Cost of goods sold 200
3. Summary Entry Cost of goods sold 200
4. Summary Entry Cost of goods sold 200
Inventory 6
5. Summary Entry Cost of goods sold 200

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