The management of ABC Corporation is analyzing the financial statements of XYZ Corporation because ABC is strongly considering purchasing a block of XYZ ordinary shares that would give ABC significant influence over XYZ. Which financial statement should ABC primarily use to assess the amounts, timing, and certainty of future cash flows of XYZ Company?
Answer(s): C
A statement of cash flows provides information about the cash receipts and cash payments of an enterprise during a period. This information helps investors, creditors, and other users to assess the enterprise's ability to generate cash and cash equivalents and the needs of the enterprise to use those cash flows. Historical cash flow data indicate the amount, timing, and certainty of future cash flows. It is also a means of verifying past cash flow assessments and of determining the relationship between profits and net cash flows and the effects of changing price.
In a statement of cash flowsindirect method), depreciation expense should be presented as
Net cash flow fromused by) operating activities may be reported indirectly by removing from profit or loss the effects of1) deferrals of past operating cash flows, 2) accruals of expected future operating cash flows.3) income or expense items related to financing and investing cash flows, and4) noncash transactions. These adjustments include such items as depreciation, amortization of patents, amortization of bond discount and bond premium gains and losses. changes during the period in trade receivables, changes in inventory, and changes in accounts payable and accrued liabilities. In the reconciliation of profit or loss to net cash fromused by) operations, depreciationa noncash expense) is added to profit or loss.
A financial statement includes all of the following items: profit. depreciation, operating activities, and financing activities. What financial statement is this?
A statement of cash flows is a required financial statement. It provides information about cash receipts and payments by reporting the cash effects of an enterprise's operating, investing, and financing activities. Related disclosures report the effects of noncash investing and financing activities. If the statement is presented using the indirect method, it will reconcile profit or loss to net cash fromused in) operating activities. Depreciation, a noncash expense, is included in this presentation.
An enterprise decided to sell a separate major line of its business. The assets were sold for US $100, 000 and had a net carrying amount US $70, 000. The applicable tax rate was 20%. The result of this transaction may appear on the
A discontinued operationDO) is a component of an entity that has been disposed of or meets the criteria for classification as held for sale. It is1) a separate major line of business or geographical operating area, 2) part of a single plan to dispose of such a line or area. or3) a subsidiary acquired solely for resale. A component of an entity consists of operations and cash flows that are clearly distinguishable from the rest of the entity for financial reporting as well as operationally. A single amount is disclosed on the face of the income statement equal to the sum of1) after-tax profitloss) on DOs and2) after-tax gainloss) ona) remeasurement of noncurrent assetsor disposal groups) classified as held for sale at fair value minus cost to sell orb) disposal of the assets or disposal groups that constituted the DO.
On December 1. Year 1, a company using the installment sales method sold goods that cost US $1.000 for US $1.500. The buyer paid US $100 down. Monthly payments start January 1. Year 2. Interest accrues at 1% per month on the unpaid balance. To the nearest dollar, the effect on profit for Year 1 is
Answer(s): B
The gross profit margin is 33-1/3% [(US $1.500 - $1.000) $1, 500], so the amount of profit from the US $100 down payment recognizable in Year 1 is US $33rounded). Interest accrued on the US $1.400$1, 500 - $100) balance for 1 month is US $14. Consequently the effect on profit is US $47$33 $14).
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