Determine the cash flow from operations given the following table. Item Amount Cash payment of dividends $30 Sale of equipment $10 Net income $25 Purchase of land $15 Increase in accounts payable $20 Sale of preferred stock $25 Increase in deferred taxes $5 Profit on sale of equipment $15 A) $35. B) $45. C) $20. D) $15.
Should be (A) $25 + $20 (increase in accts payable) + $5 (increase in deferred taxes) - $15 (profit on sale of equipment) Let me know if I’m wrong on this. FSA is very far from being a strong topic for me.
That’s correct. Very simple question but I got confused there …
Keep them coming, maratikus. I need all the practice I can get.
A question in this regards with respect to Cashflows: Should deferred taxes always be considered a Liability? I see for the right answer Increase in Deferred taxes is being added back - so this is just like Accounts Payable or any other liability. Given SS 10 of FSA - where we are introduced to DTL and DTA – should we consider a Deferred Tax = Net (DTL + DTA) and if it increases - it is a net liability If it decreases - this is a net Asset? CP
cpk123 Wrote: ------------------------------------------------------- > A question in this regards with respect to > Cashflows: > > Should deferred taxes always be considered a > Liability? I see for the right answer Increase in > Deferred taxes is being added back - so this is > just like Accounts Payable or any other > liability. > > Given SS 10 of FSA - where we are introduced to > DTL and DTA – should we consider a > Deferred Tax = Net (DTL + DTA) and if it increases > - it is a net liability > If it decreases - this is a net Asset? > > CP —most of the questions I did for the reading on deferred taxes and session 10 will general give you a net liability, it’s because most comps have a higher DTL than DTA (usually, due to depreciation), I think if they want it to be DTA, it’ll be explicitly stated. and in the case of this question, it said “increase in deferred taxes” which means their cash taxes paid was $5 less than their tax expense, so that’s a liability