Cash Flow Statementouestions 24 to 32 (Effects of transactions on Statement of C

Question

Cash Flow Statementouestions 24 to 32 (Effects of transactions on Statement of Cash Flows using U.S. GAAP and assuming the indirect method) A. Cash flows from operating activities-Net income will be increased or adjusted upward. B. Cash flows from operating activities-Net income will be decreased or adjusted downward. C. Cash flows from investing activities D. Cash flows from financing activities E. Reported as significant noncash investing and financing activities, or not required to be reported on the cash flow statement 24. Inventory increased by $50,000. 25. Unrealized gains on Trading Securities 26. The Company redeemed (retired early) $10,000,000 of bonds at 101.

Explanation / Answer

Inventory Increased by $50,000 – Increase in Inventory by $50,000 will be Reported under Cash Flows from Operating Income as Net Income will be Decreased as an Adjustment, because it is a Cash Outflow (assuming Inventory was Purchased on Cash).

Unrealized Gains on Trading Securities – Unrealized Gains on Trading Securities will be Reported under Cash Flow from Operating Income as Net Income will be Decreased as an Adjustment, since the Gain has been Realized on Paper Only, and not in Cash.

The Co. Redeemed (Retired Early) $10,000,000 of Bonds at 101 – Loss Portion on Retirement of Bonds on Loss will be first Reported under Cash Flow from Operating Income as Net Income will be Increased as an Adjustment. The Total Amount of $10,100,000 ($10,000,000 ÷ 100 × 101) will be then, Considered as Cash Flow from Financing Activities.

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