Effects of Transactions on Statement of Cash Flows

question 29

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 (SCF) (indirect method). If not disclosed, write "Not shown." If an item is a noncash transaction that should be shown separately, write "noncash." If an item is added to net income, write "Add," and if an item 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). There is more than one answer for some items.(a) For 2015, income before an extraordinary loss was $460,000. A tornado damaged a building and its contents. The proceeds from insurance companies totaled $120,000, which was $50,000 less than the book values. The tax rate was 30%. (Show the calculation of the net income shown on the SCF, and indicate how other items should be shown on the SCF.)(b) Amortization of bond premium, $1,100.(c) The balance in Retained Earnings was $875,000 on December 31, 2014 and $1,310,000 on December 31, 2015. Net income was $1,170,000. A stock dividend was declared and distributed which increased common stock $325,000 and paid-in capital $170,000. (Show calculation of the cash dividend and indicate how it and the stock dividend would be shown on the SCF.)(d) Equipment, that cost $115,000 and had accumulated depreciation of $53,000, was sold for $66,000.(e) The deferred tax liability increased $18,000.(f) Issued 3,000 shares of preferred stock, $50 par, with a market value of $110 per share for land. (Show the amount also.)

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Definitions:

Lack-Of-Participation Error

Lack-of-participation error occurs when important people are excluded from the decision-making process.

Rational Decision Model

A systematic, step-by-step approach to making decisions based on logical, objective analysis of data and alternatives.

Creativity

The ability to generate or recognize ideas, alternatives, or possibilities that may be useful in solving problems, communicating with others, and entertaining ourselves and others.

Task Expertise

Specific knowledge or skills related to performing certain tasks efficiently and effectively.