Explain How the Following Transactions Should Be Reported in the Statement

question 57

Essay

Explain how the following transactions should be reported in the statement of cash flows, assuming the indirect method is used to determine cash flows from operating activities. Identify all available options. If not reported on the statement of cash flows, indicate the disclosure requirements, if any.
1. Income tax expense of $30,000. The income tax payable account increased $7,000, while the deferred income tax liability account decreased $9,000.
2. Cash dividend of $40,000 declared. The dividends payable account increases $25,000.

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Definitions:

Repay

To return money that was borrowed, often including interest in the case of loans or credit.

Purchase Money Security Interest

A purchase money security interest is a particular type of security interest that enables creditors to have a claim over assets that were acquired with the funds provided by the creditor.

Negative Equity

Occurs when the value of an asset falls below the outstanding balance on the loan used to purchase that asset.

Drawee

A person on whom a draft is drawn by the drawer.