Hbr – Cash Flow Stattement – Chemalite.

 Exercises Classification of Cash Flows
For each event listed below, select the appropriate category which describes the effect of the event on a statement of cash flows:

a. Cash provided/used by operating activities.
b. Cash provided/used by investing activities.
c. Cash provided/used by financing activities.
d. Not a cash flow. C/A

Payment on long-term debt (company pays INTEREST only) – think about this how this could be both – related to debt because financing and operating because it’s part of operations C
Issuance of bonds at a premium A
Collection of accounts receivable D
Cash dividends declared – it’s not a cash flow D
Issuance of shares to acquire land (“exchange” of shares for land) – no cash exchanges here B
Sale of marketable securities (long-term) – A
Payment of employees’ wages C
Issuance of common shares for cash A/?
Payment of income taxes payable – could be the disposition of property, etc. then this will fall under-investing B
Purchase of equipment B
Purchase of common shares in another company B
Sale of real estate held as a long-term investment

Transactions Transaction
Journal Entry
Impact on earnings
Impact on cash flows
Cash flow classification
Adjustment

 

Issue 1,000 shares for $10,000
Dr. cash (BS) 10K Cr. Common shares 10K
INFLOW of 10k
Financing

Introduction to Cash Flow construction The Controller of Schmidt Tooling Corporation has provided you with the following information: Schmidt Tooling Corporation| Income Statement| For the Year Ended December 31, 2010.

Net Sales
620,000

Operating expenses
410,000

Income from operations
210,000

Gain on sale of equipment
30,000

Interest expense
8,000

Income before income taxes
232,000

Income taxes
92,800

Net income
139,200

Comparative Account Information. Relating to Operations.

For the Year Ended December 31, 2010
2010
2009

Accounts receivable
56,000
40,000

Prepaid insurance
5,000
6,000

Accounts payable
59,000
47,000

Interest payable
600
1,500

Income taxes payable
4,200
6,000

Unearned revenue
20,000
14,000

Instructions: Prepare a statement of cash flows (for the company’s operating activities only) for the year ended December 31, 2010, using the indirect format.

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