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Chapter 2: 8DQ (page 46)

What are the three primary sections of the statement of cash flows? In what section would the payment of a cash dividend be shown?

Short Answer

Expert verified

The three primary sections of the statement of cash flow are as follows:

  1. Cash flow from operating activities
  2. Cash flow from investing activities
  3. Cash flow from financing activities

And the cash dividend is shown under cash flow from financing activities.

Step by step solution

01

Cash flow from operating activities

Cash flow from operating activity shows the movement of cash in the organization due to its operating activities,such as buying or selling goods and services.

02

Cash flow from investing activities

Cash flow from investing activity shows the cash inflow and outflow relating to the investment activities in the organization, such as the buying of fixed assets, investment, etc.

03

Cash flow from financing activities

Cash flow from financing activity shows the cash inflow and outflow relating to the funds used by the organization,such as the issuing of equity shares, debentures, etc. The payment of cash dividends is also reflected in this section.

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Most popular questions from this chapter

In January 2007, the Status Quo Company was formed. Total assets were \(544,000, of which \)306,000 consisted of depreciable fixed assets. Status

Quo uses straight-line depreciation of \(30,600 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been \)29,000 per year each of the last 10 years. Other assets have not changed since 2007.

c. Now assume income increased by 10 percent each year. What effect would this have on your preceding answers? (A comment is all that is necessary.)

Identify whether each of the following items increases or decreases cash flow:

Increase in accounts receivable

Decrease in prepaid expenses

Increase in notes payable

Increase in inventory

Depreciation expense

Dividend payment

Increase in investment

Increase in accrued expenses

Decrease in account payable

Question:The Haines Corp. shows the following financial data for 20X1 and 20X2:

20X1

20X2

Sales

\(3,230,000

\)3,370,000

Cost of goods sold

2,130,000

2,850,000

Gross profits

\(1,100,000

\)520,000

Selling and administrative expenses

298,000

227,000

Operating profits

\(802,000

\)293,000

Interest expense

47,200

51,600

Income before taxes

\(754,800

\)241,400

Taxes (35%)

264,180

84,490

Income after tax

\(490,620

\)156,910

For each year, compute the following and indicate whether it is increasing or

decreasing profitability in 20X2 as indicated by the ratio:

b. Selling and administrative expense to sales.

Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.

b. What is its return on stockholders鈥� equity?

Arrange the following income statement items so they are in the proper order of an income statement:

Taxes

Earning per share

Share Outstanding

Earning before taxes

Interest Expense

Cost of goods sold

Depreciation Expense

Earning after taxes

Preferred Stcok dividends

Earning available to common stockholders

Sales

Selling and administrative expense

Gross profit
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