Enterprise Fund Statement of Cash Flows (Interest Earned)

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  • #188963
    Anonymous
    Inactive

    Dogwood City’s water enterprise fund received interest of $10,000 on long-term investments. How should this amount be reported on the Statement of Cash Flows?

    a. Operating activities.

    b. Investing activities.

    c. Capital and related financing activities.

    d. Non-capital financing activities.

    Explanation

    Choice “b” is correct. Cash receipts associated with interest income are reported as investing activities for purposes of enterprise fund Statement of Cash Flow reporting.

    Choice “a” is incorrect. Although cash receipts associated with interest income are frequently classified as operating activities for purposes of commercial Statement of Cash Flow reporting, enterprise funds report these cash inflows as investing activities.

    Choice “d” is incorrect. Non-capital financing activities anticipate the cash flows associated with borrowing and lending related to sustaining operations.

    Choice “c” is incorrect. Capital financing activities anticipate the cash flows associated with borrowing and lending related to long-lived assets.

    I don’t understand why it isn’t operating activities? I believe its operating activities because it is interest earned.

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  • #610511
    Iggy1985
    Member

    Interest expense would be capital or noncapital financing; Interest received on investments is investing.

    Here's a sample proprietary funds statement of cash flows https://img.photobucket.com/albums/v301/Vixia/samplepropfundscf_zps09e2a43c.png

    FAR - 89 (8/19/14) Wiley TB, Wiley Book, Books from School, Ninja Audio/Notes
    AUD - 92 (10/14/14) Wiley TB, Wiley Book, Ninja Audio
    BEC - 82 (5/8/15) Mostly Ninja MCQ, sprinkles of Becker lectures and Ninja Audio
    REG - (8/14/15)

    #610512

    Yeah the rules are different than for that of a filer.

    #610513

    Yeah the rules are different than for that of a filer.

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