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Basic Question 2 of 24
Which of the following would not be reported on a statement of cash flows?
B. Bonds were issued at price less than their par or stated value.
C. Cash dividends were declared.
D. Land was purchased by paying $10,000 down and issuing a mortgage note.
E. Equipment that had no book value was sold for $1,000.
A. Common stock was sold at a price in excess of its par value.
B. Bonds were issued at price less than their par or stated value.
C. Cash dividends were declared.
D. Land was purchased by paying $10,000 down and issuing a mortgage note.
E. Equipment that had no book value was sold for $1,000.
User Contributed Comments 9
| User | Comment |
|---|---|
| Rajain | ?? could somebody explain why is the answer C. Rather it should be B. |
| Gina | the dividend was only declared [not paid out yet], ie the record would be debit to Retained Earnings, credit to Dividends Payable. Hence there is no cash transaction involved. as for B: when you issue bonds a cash transaction happens (you issue them to borrow money): debit to cash, credit to bonds payable. B simply says that they were issued at a discount. |
| Bibhu | The trick here is the difference between the word declared and issued. Issued means transactions executed. Declared means its not done and there is no cash flow as such. |
| coolnan | Thanx Gina and Bibhu |
| mirfanrana | issued means transaction executed and declared means its not done yet |
| johntan1979 | Declare: all talk no action |
| ldfrench | ^Kinda like my last girlfriend :( |
| farhan92 | damn! ^ |
| ascruggs92 | ^^well played |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
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Learning Outcome Statements
compare and contrast the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method;
describe how the cash flow statement is linked to the income statement and the balance sheet;
describe the steps in the preparation of direct and indirect cash flow statements, including how cash flows can be computed using income statement and balance sheet data;
demonstrate the conversion of cash flows from the indirect to direct method;
CFA® 2024 Level I Curriculum, Volume 3, Module 20.