CMA Study Group

 View Only

  • 1.  Part 2 - Cash flow - Operating activities

    Posted 09-07-2014 03:26 PM

    Selected financial information for Kristina Company for the year just ended is shown below.


     


    Assuming the indirect method is used, Kristina's cash flow from operating activities for the year is:

    *Source: Retired ICMA CMA Exam Questions.
    $1,700,000.
    $2,400,000.
    $2,000,000.
    $3,100,000.

    Can anyone explain 

    1) Why cash received from sale-of available for sale securities not to be considered in Ioerating activities ????

    2) Why only Gain has to be considered 


    -------------------------------------------
    Brijesh Salian
    Manager
    Reema Building Material LLC
    Jibroo
    Oman
    -------------------------------------------


  • 2.  RE:Part 2 - Cash flow - Operating activities

    Posted 09-07-2014 03:33 PM

    Hie....

    sale on securities in an investing activity to raise finances we are investing in other security any gain or loss on selling security makes it operational and hence gain and loss are either subtracted or added back to net income in operating activity
    -------------------------------------------
    Mariam Adnan
    Accountant
    Manama
    Bahrain
    -------------------------------------------



    Original Message


  • 3.  RE: Part 2 - Cash flow - Operating activities

    Posted 09-12-2014 06:17 AM

    Thanks for the reply ...



    -------------------------------------------
    Brijesh Salian
    Manager
    Reema Building Material LLC
    Jibroo
    Oman
    -------------------------------------------


    Original Message


  • 4.  RE: Part 2 - Cash flow - Operating activities

    Posted 09-13-2014 04:39 AM
    Dear Brijesh,

    Operating activities contains the cash flow from normal course of business operations. Gain on sale of assets are recognized in the PL as "Gain on sale of assets" as other income which is not normal revenue like sales or service (i.e. normal course of business). So, It needs to be deducted from net income in order to know the real cash flow from operating activities.

    If "loss on sale of assets" given, then you must add with Net Income in operating activities.

    Technically, Sale of available for sale securities are part of investing activities, and in this question, cash recevied from sale of available for sale securities ($2,800,000) includes this gain.

    -------------------------------------------
    Ganesan Sivalingam
    Muscat
    Oman
    -------------------------------------------


    Original Message


  • 5.  RE: Part 2 - Cash flow - Operating activities

    Posted 10-14-2014 04:48 PM
    The correct answer is 1,700 as follows:

    2,000 - 300 + 100 + 200 + 400 - 700
    notes:
    1- depr. exp is a non-cash exp, thus sould be added back to NI to reach the CF from operation
    2- G/L from AVF sale securities is also non-cash gain, which affected the NI but not affected the CF!, thus it should be subtracted out from NI to reach the CF from operation.
    3- Other numbers are straight forward; AR increase means credit sales are over cash sales (credit cash is not yet turned into cash), thus this over-amount should be subtracted from CF, and opposit is the AP transaction either increase or decrease.


    I hope this will help you.


    ------------------------------
    Ashraf Mohammad CIA
    Director/Manager
    Salmeya
    Kuwait
    ------------------------------


    Original Message