WGU C213 Statement of Cash Flows Questions and Answers Rated A

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WGU C213 Statement of Cash Flows Questions and Answers Rated A What is the purpose of the statement of cash flows? ✔✔reports the amount of cash collected and paid out by a company in the follow... ing three types of activities: operating, investing, and financing. What information is provided on the statement of cash flows? ✔✔explains the change during the period in cash and cash equivalents. Cash equivalents are shortterm, highly liquid investments such as Treasury bills, commercial paper, and money market funds What are the three main categories found on the statement of cash flows? ✔✔Operating, investing, and financing Operating activities ✔✔All transactions relating to a company's delivering or producing its goods for sale and providing its services are called operating activities. Investing activities ✔✔ Financing Activities ✔✔ Net Amount of Cash ✔✔provided or used by operating activities is THE key figure in a statement of cash flows. In the same way that net income is used to summarize everything in an income statement, net cash from operations is the "bottom line" of the cash flow statement. Which items are recorded as operating activities on the statement of cash flows? ✔✔Cash Reciepts - Sale of Goods, Interest revenues, dividend revenue Cash Payments - Inventory purchases, Wages salary, Tax, interest expense Statement of Cashflows ✔✔ Which items are recorded as financing activities on the statement of cash flows? ✔✔include the issuance of notes, bonds, mortgages, and other short- or long-term borrowings, and the issuance of stock. Which items are recorded as investing activities on the statement of cash flows? ✔✔Cash inflows and outflows from (1) acquiring and selling productive assets such as property, plant, and equipment, (2) acquiring and selling investment securities, and (3) lending money and collecting on those loans are called investing activities. What are non-cash investing and financing transactions? ✔✔equipment may be purchased with a note payable, or land may be acquired by issuing stock. What is free cash flow? ✔✔thought of as the extra cash flow generated by operations, over and above what is needed to keep the corporation running and expanding Operating Cash - Investing Cash 6-step process for preparing a statement of cash flows? (3) ✔✔Compute the change in the cash balance during the period Convert the income statement from an accrual basis to a cash basis Analyze the long-term assets to identify the cash flow effects of investing activities 6 Step process for preparing a statement of cashflow (3) ✔✔Analyze the short-term and long-term debt and the stockholders' equity accounts to determine the cash flow effects of any financing transactions Make sure that the total net cash flow from operating, investing, and financing activities is equal to the net increase or decrease in cash as computed Disclose any significant investing or financing transactions that did not involve cash. What is the indirect method of reporting cash flows from operating activities? ✔✔indirect method begins with net income as reported in the income statement and then details the adjustments needed to arrive at cash flow from operations. What is the advantage of using the indirect method? ✔✔reports directly the major classes of operating cash receipts and payments of an entity during a period What is the direct method of reporting cash flows from operating activities? What is the advantage of using the direct method? ✔✔The direct method is favored by many users of financial statements because it is easy to understand indirect method highlights the reasons for the difference between net income and cash from operations. Cautio [Show More]

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