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Chapter 23: Q4IFRS (page 1399)

Stan Conner and Mark Stein were discussing the statement of cash flows of Bombeck Co. In the notes to the statement of cash flows was a schedule entitled “Non-cash investing and financing activities.” Give three examples of significant non-cash transactions that would be reported in this schedule.

Short Answer

Expert verified

Examples of Non-cash transactions are as follows:

  1. Issuing shares in exchange for non-cash assets;
  2. Issuing shares to pay off debt;
  3. Issuing bonds or notes in exchange for non-cash assets.

Step by step solution

01

Meaning of Financing activities

A trade’s net financing over a particular period is considered financing activities. The issuing and reimbursement of values, the payment of profits, the issuance and reimbursement of obligations, and capital rent obligations are all examples of financial activity.

02

Explanation on non-cash investing and financing activities

Non-cash investing and financing transactions are the transactions are the transactions that are engaged in financing and investing activities, without any change in the cash flows. It is reported separately under the schedule of “Non-cash investing and financing activities”.

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Most popular questions from this chapter

Novak Corporation is preparing its 2017 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2017 statement of cash flows.

Code Letter Effect

A Added to net income in the operating section

D Deducted from net income in the operating section

R-I Cash receipt in investing section

P-I Cash payment in investing section

R-F Cash receipt in financing section

P-F Cash payment in financing section

N Noncash investing and financing activity

(a)Purchase of land and building

(b)Decrease in accounts receivable

(c)Issuance of stock.

(d)Depreciation expense.

(e)Sale of land at book value.

(f)Sale of land at a gain.

(g)Payment of dividends.

(h)Increase in accounts receivable.

(i)Purchase of available-for-sale debt investment

(j)Increase in accounts payable.

(k)Decrease in accounts payable.

(l)Loan from bank by signing note

(m)Purchase of equipment using a note

(n)Increase in inventory

(o)Issuance of bonds.

(p)Redemption of bonds payable.

(q)Sale of equipment at a loss.

(r)Purchase of treasury stock.


Question: (SCF Theory and Analysis of Transactions) Ashley Company is a young and growing producer of electronic measuring instruments and technical equipment. You have been retained by Ashley to advise it in the preparation of a statement of cash flows using the indirect method. For the fiscal year ended October 31, 2017, you have obtained the following information concerning certain events and transactions of Ashley.

1. The amount of reported earnings for the fiscal year was \(700,000, which included a deduction for a loss of \)110,000 (see item 5 below).

2. Depreciation expense of \(315,000 was included in the income statement.

3. Uncollectible accounts receivable of \)40,000 were written off against the allowance for doubtful accounts. Also, \(51,000 of bad debt expense was included in determining income for the fiscal year, and the same amount was added to the allowance for doubtful accounts.

4. A gain of \)6,000 was realized on the sale of a machine. It originally cost \(75,000, of which \)30,000 was undepreciated on the date of sale.

5. On April 1, 2017, lightning caused an uninsured building loss of \(110,000 (\)180,000 loss, less reduction in income taxes of \(70,000). This loss was included in determining income as indicated in item 1 above.

6. On July 3, 2017, building and land were purchased for \)700,000. Ashley gave in payment \(75,000 cash, \)200,000 market price of its unissued common stock, and signed a \(425,000 mortgage note payable.

7. On August 3, 2017, \)800,000 face value of Ashley’s 10% convertible debentures was converted into $150,000 par value of its common stock. The bonds were originally issued at face value.

Instructions

Explain whether each of the seven numbered items above is a cash inflow or outflow, and explain how it should be disclosed in Ashley’s statement of cash flows for the fiscal year ended October 31, 2017. If any item is neither an inflow nor an outflow of cash, explain why it is not, and indicate the disclosure, if any, that should be made of the item in Ashley’s statement of cash flows for the fiscal year ended October 31, 2017.

Use the information from BE23-4 for Bloom Corporation. Prepare the cash flows from operating activities section of Bloom’s 2017 statement of cash flows using the indirect method.

Following are selected statement of financial position accounts of Sander Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2017, and additional information.

Selected statement of financial position accounts

2017

2016

Increase

(Decrease)

Assets

Property, plant, and equipment

\(277,000

\)247,000

\(30,000

Accumulated depreciation

(178,000)

(167,000)

(11,000)

Accounts receivable

34,000

24,000

10,000

Equity and liabilities

Share capital—ordinary, \)1 par

\( 22,000

\) 19,000

\( 3,000

Share premium—ordinary

9,000

3,000

6,000

Retained earnings

104,000

91,000

13,000

Bonds payable

49,000

46,000

3,000

Dividends payable

8,000

5,000

3,000

Selected income statement information for the year ended December 31, 2017

Sales revenue

\)155,000

Depreciation

38,000

Gain on sale of equipment

14,500

Net income

31,000

Additional information:

  1. During 2017, equipment costing \(45,000 was sold for cash.
  2. Accounts receivable relate to sales of merchandise.
  3. During 2017, \)25,000 of bonds payable were issued in exchange for property, plant, and equipment.

There was no amortization of bond discount or premium.

Instructions Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items.

  1. Payments for purchase of property, plant, and equipment.
  2. Proceeds from the sale of equipment.
  3. Cash dividends paid.
  4. Redemption of bonds payable.

At January 1, 2017, Eikenberry Inc. had accounts receivable of \(72,000. At December 31, 2017, accounts receivable is \)54,000. Sales revenue for 2017 total $420,000. Compute Eikenberry’s 2017 cash receipts from customers.
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