Effects of Transactions on Statement of Cash Flows

question 47

Essay

Effects of transactions on statement of cash flows.Indicate for each of the following what should be disclosed on a statement of cash flows (indirect method). If not disclosed, write "Not shown." There may be more than one answer for some items. For an item that is added to net income, write "Add," and for an item that is deducted from net income, write "Deduct." Show financing and investing outflows in parentheses. For example, an answer might be: Deduct $4,700 or Investing ($31,000). If the item is a noncash transaction that should be disclosed separately, write "Noncash."(a) The deferred tax liability increased $10,000.(b) The balance in Investment in Hoyt Co. Stock increased $12,000 as a result of using the equity method.(c) Issuance of a stock dividend increased common stock $40,000 and paid-in capital $16,000.(d) Amortization of bond discount, $1,600.(e) Machinery that cost $100,000 and had accumulated depreciation of $48,000 was sold for $54,000.(f) Issued 9,000 shares of common stock ($10 par) with a market price of $15 per share for machinery. (Show the amount, too.)(g) Amortization of patents, $3,000.(h) Cash dividends paid, $60,000.

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Definitions:

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are expected to generate the most profit or benefit to the organization over time.

Cost of Equity Financing

The return that investors expect for providing capital to a company, often regarded as the riskiest form of financing.

Cost of Equity

The yield a business seeks to determine whether an investment satisfies the criteria for capital returns, frequently employed in evaluating the expense of financing initiatives.

Financial Models

Quantitative tools built to represent the performance of a financial asset or portfolio, often used for forecasting and decision making.