[Stgeorge]

Payne Co. prepares its statement of cash flows using the indirect method. Payne’s unamortized bond discount account decreased by $25,000 during the year. How should Payne report the change in unamortized bond discount in its statement of cash flows?

A) As a financing cash inflow.

B) As a financing cash outflow.

C) As an addition to net income in the operating activities section.

D) As a subtraction from net income in the operating activities section.

So I was looking at this question and tried to make sense of it. I originally picked B but the correct answer is C. Since Equity Securities are measured at FV for NFT. Could someone better explain why this is the answer?

FAR 81
AUD 65, 84 (Used Ninja MCQ which I say contributed to my huge increase in score I love you Jeff)
REG 87 (CPA excel Wiley Self Study Book, Ninja 10 point combo)
BEC 86! I Must Pass or I lose my FAR Credit, Pray for me(Becker, Wiley, WTB, Ninja MCQ, Ninja Notes)

DONE!!!!!!

Using : Wiley CPA Exam Review Textbook, Wiley TB, Ninja Notes, Ninja MCQ

[Lidis]

INDIRECT METHOD

Net income (inflow)

ADD: (Non cash expenses)

Decrease in current assets

Increase in current liabilities

Depreciation

Amortization in intangible assets

Bond discount amortization

Losses

Bad debt expense

Warranties expense

LESS: (Non cash revenues)

Increase in current assets

Decrease in current liabilities

Bond Premium amortization

Gain

Equity in earnings

The above items are added or subtract to arrive to nwt cash flow from operating activities

[M.O.D.]

Where does it say this is a non-profit?

And the bond discount is amortized as interest expense.

Because it is not a cash expense, it is added back to Operating income to determine cash flow.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Author]

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