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Hbr – Cash Flow Stattement – Chemalite.

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 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:

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  • 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
  1. 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
  2. Issuance of bonds at a premium A
  3. Collection of accounts receivable D
  4. Cash dividends declared – it’s not a cash flow D
  5. Issuance of shares to acquire land (“exchange” of shares for land) – no cash exchanges here B
  6. Sale of marketable securities (long-term) - A
  7. Payment of employees' wages C
  8. Issuance of common shares for cash A/?
  9. Payment of income taxes payable – could be the disposition of property, etc. then this will fall under-investing B
  10. Purchase of equipment B
  11. Purchase of common shares in another company B
  12. 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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