Question

BRONCO METALS Statement of Cash Flows For the Year Ended December 31, 2018 Cash flows from operating activities: Collections from customers $ 373, eee Interest on note receivable 4,400 Dividends received from 2,800 investments Purchase of inventory (190,000) Payment of operating expenses (63, 000) Payment of interest'on note payable (8,400) Net cash flows from operating activities $118, see Cash flows from investing activities: Collection of note receivable 120, eae Purchase of equipment (194,000) Net cash flows from investing activities (74, eee) Cash flows from financing activities: Proceeds from issuance of common stock 240, een Dividends paid (44,000) Net cash flows from financing activities 196, eee Net increase in cash 248,888 Cash and cash equivalents, 28,200 January 1 Cash and cash equivalents, December 31 $269, eee Required: Prepare the statement of cash flows assuming that Bronco prepares its financial statements according to International Financial Reporting Standards. Where IFRS allows flexibility, use the classification used most often in IFRS financial statements. (Amounts to be deducted should be indicated with a minus sign.) BRONCO METALS Statement of Cash Flows For the Year Ended December 31, 2018

Answer 1

Consistent with U.S. GAAP, international standards also require a statement of cash flows. Consistent with U.S. GAAP, cash flows are classified as operating, investing, or financing. However, the U.S. standard designates cash outflows for interest payments and cash inflows from interest and dividends received as operating cash flows. Dividends paid to shareholders are classified as financing cash flows.

IAS No. 7, on the other hand, allows more flexibility. Companies can report interest and dividends paid as either operating or financing cash flows and interest and dividends received as either operating or investing cash flows. Interest and dividend payments usually are reported as financing activities. Interest and dividends received normally are classified as investing activities.

Accordingly, the statement of cash flows prepared according to IFRS mostly likely would be presented as follows (differences from U.S. GAAP in italics):

BRONCO METALS

Statement of Cash Flows

For the Year Ended December 31, 2018

Cash flows from operating activities:

  Collections from customers   $ 373,000

  Purchase of inventory (190,000)

  Payment of operating expenses    (63,000)

Net cash flows from operating activities   $120,000

Cash flows from investing activities:

Interest on notes receivable 4,400

Dividends received from investments 2,800

Collection of notes receivable 120,000

  Purchase of equipment    (194,000)

Net cash flows from investing activities (66,800)

Cash flows from financing activities:

Payment of interest on notes payable (8,400)

Issuance of common stock 240,000

  Dividends paid to shareholders (44,000)

   Net cash flows from financing activities   187,600

Net increase in cash 240,800

Cash and cash equivalents, January 1 28,200

Cash and cash equivalents, December 31 $269,000