Last Updated 04 Aug 2020
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
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- 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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