[Anonymous]

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.

[Iggy1985]

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)

[treystephens16]

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

[treystephens16]

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

[Author]

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