The following list contains activities that may be added or subtracted from operating profit when reconciling to cash flows from operating activities. Indicate whether each activity is added, subtracted or irrelevant.Increase in building. Answer 1 Question 2Increase in accounts receivable. Answer 2 Question 2Repayment of long-term debt. Answer 3 Question 2Gain in sale of vehicle. Answer 4 Question 2Decrease in tax payable. Answer 5 Question 2
Question
The following list contains activities that may be added or subtracted from operating profit when reconciling to cash flows from operating activities. Indicate whether each activity is added, subtracted or irrelevant.Increase in building. Answer 1 Question 2Increase in accounts receivable. Answer 2 Question 2Repayment of long-term debt. Answer 3 Question 2Gain in sale of vehicle. Answer 4 Question 2Decrease in tax payable. Answer 5 Question 2
Solution
Answer 1: Irrelevant - Increase in building is a capital expenditure and is not included in the operating activities section of the cash flow statement.
Answer 2: Subtracted - Increase in accounts receivable is subtracted because it represents a use of cash. When accounts receivable increases, it means that customers have not yet paid for sales made on credit, which reduces cash flow.
Answer 3: Irrelevant - Repayment of long-term debt is a financing activity, not an operating activity, so it is not included in the reconciliation of operating profit to cash flows from operating activities.
Answer 4: Subtracted - Gain on sale of vehicle is subtracted because it is a non-cash item. The gain increases net income but does not increase cash flow from operating activities.
Answer 5: Added - Decrease in tax payable is added because it represents a source of cash. When tax payable decreases, it means that less cash has been used to pay taxes, which increases cash flow.
Similar Questions
4.7.Indicate whether each of the following items would result in net cash flowfrom operating activities being higher (H) or lower (L) than net income.1.Decrease in accounts payable.2.Depreciation expense.3.Decrease in inventory.4.Gain on sale of assets.5.Increase in accounts receivable.6.Increase in deferred tax liabilities.7.Decrease in accrued liabilities.8.Increase in prepaid expenses.9.Increase in deferred revenue.10.Decrease in interest receivable.
On the statement of cash flows activities from operations include ______.Multiple choice question.cash incurred by taking on or repaying business debtcash used in or provided by the firm's investment activitiescash received or spent on long term assetscash transactions associated with running the business
Which of these could not be classified as an operating activity in a statement of cash flows?Correct Answer Loan repayments. Payment of interest expense. You Answered Cash received as payment for the sale of goods on credit in the previous year. Cash dividends received.
Which of the following is classified under cash flow from operating activities? a. Purchase of office equipment for cash b. Income taxes paid c. Dividend paid d. Sale of office equipment for cash
What are the three major activities of a firm shown on the statement of cash flows?Multiple select question.financingoperationsinvestmentsdepreciation
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.