Cash Flow Statements

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Cash Flow Statements

Robert Morgan


Stacy Hiles

August 1, 2014

Cash Flow Statements Please complete the following 5 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

1. Critical Thinking Question: Answer the following questions: Why are noncash transactions, such as the exchange of common stock for a building for example, included on a statement of cash flows? How are these noncash transactions disclosed? There are occasions when certain transactions occur without actually generating cash. Examples can include an exchange of stock for real-estate or, conversion of debt to equity or acquisition property by default on a note-payable (i.e. repos and foreclosures). These transactions do not actually generate an inflow or out flow of cash but, they do highlight significant changes to investing and financing activities. When this occurs there are essentially two ways to report it on a cash flow statement. Recommended by the Financial Accounting Standards Board, “For the resulting operating cash receipts and payments to be accurate, the effects of all noncash entries to accounts receivable and payable, inventory, and other balance sheets accounts used in the calculation must be eliminated.”(Statement of Financial Accounting Standards No. 95. 1987, November 1). Accordingly, noncash transactions should be either disclosed in the notes to the statement of cash flow or on a separate schedule known as a supplemental disclosure.

2. Classification of activities Classify each of the following transactions as arising from an operating (O),…...

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