2 acquiring use of an asset by entering into a lease

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2) Acquiring use of an asset by entering into a lease agreement. 3) Converting debt into common stock. 4) Exchanging noncash assets or liabilities for other noncash assets or liabilities. AACSB: Reflective Thinking AICPA FN: Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 21-07 Identify transactions that represent noncash investing and financing activities. Spiceland - Chapter 21 #143 Topic: Noncash investing and financing activities
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144. Why are "cash equivalents" included as part of cash in the statement of cash flows? Skilled managers will invest temporarily idle cash in short-term investments to earn a return on those funds, rather than maintaining an unnecessarily large checking account. The FASB views short-term, highly liquid investments that can be easily converted into cash, with little risk of loss, to be the equivalent of cash. AACSB: Reflective Thinking AICPA FN: Measurement Blooms: Understand Difficulty: 2 Medium Learning Objective: 21-02 Define cash equivalents. Spiceland - Chapter 21 #144 Topic: Cash and cash equivalents 145. What are the general guidelines for an investment to be considered a cash equivalent? To be classified as a cash equivalent, an investment must have a maturity date not longer than three months from the date of purchase. The investment must be easily convertible into cash, with little risk of loss on the conversion. However, flexibility is permitted in designating cash equivalents. Each company must establish a policy regarding which short-term, highly liquid investments it classifies as cash equivalents. The policy should be consistent with the company's customary motivation for acquiring various investments and should be disclosed in the notes accompanying the financial statements. AACSB: Reflective Thinking AICPA FN: Measurement Blooms: Remember Difficulty: 2 Medium Learning Objective: 21-02 Define cash equivalents. Spiceland - Chapter 21 #145
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Topic: Cash and cash equivalents 146. Transactions that involve merely purchases or sales of cash equivalents generally are not reported on a statement of cash flows. Describe an exception to this generalization. What is the essential characteristic of the transaction that qualifies as an exception? Transactions that involve merely transfers from cash to cash equivalents such as the purchase of a three-month treasury bill, or from cash equivalents to cash such as the sale of a treasury bill, should not be reported in the statement of cash flows. A dollar amount is simply transferred from one "cash" account to another "cash" account so that the total of cash and cash equivalents is not altered by such transactions. An exception is the sale of a cash equivalent at a gain or loss. In this case, the total of cash and cash equivalents actually increases or decreases. The increase or decrease is reported as an adjustment to cash flow from operating activities.
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Christopher Reinemann
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