| Course | ACC-6010 Intermediate Accounting III |
|---|---|
| Module | Module 7 |
| Paper type | Written Assignment 7: statement of cash flows |
| Length | About 727 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | M.S. in Management in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6010 Module 7
Palisades Optical Corp.: Assembling the 2026 Statement of Cash Flows From Six Earlier Assignments
Student Name
M.S. in Management in Accounting, Thomas Edison State University
ACC-6010: Intermediate Accounting III
Mentor Name
Month Day, Year
Palisades Optical Corp.: Assembling the 2026 Statement of Cash Flows From Six Earlier Assignments
Introduction
The statement of cash flows undoes the accruals behind net income and reorganizes cash movements into operating, investing and financing activities (Kieso et al., 2012). Because Palisades' 2026 transactions were recorded across six assignments, preparing it also tests whether each earlier item was understood. Palisades' cash fell from $3,801,910 to $1,440,000 during 2026 as it put its surplus cash to work in the investments recorded in Module 1.
The Statement, Indirect Method
| Operating activities | Amount |
|---|---|
| Net income: $1,150,000 pretax less $241,500 tax | $908,500 |
| Depreciation | 1,150,000 |
| Amortization of patents | 80,000 |
| Equity method income in excess of dividends: $285,000 minus $100,000 | (185,000) |
| Bond premium amortization: cash interest exceeds interest revenue | 7,835 |
| Unrealized gain on equity securities | (24,000) |
| Deferred income tax expense | 195,300 |
| Gain on sale of equipment | (45,000) |
| Pension contributions in excess of expense: $700,000 minus $652,500 | (47,500) |
| Increase in accounts receivable | (210,000) |
| Increase in inventory | (330,000) |
| Decrease in prepaid expenses | 12,000 |
| Increase in accounts payable | 140,000 |
| Increase in contract liability | 166,250 |
| Increase in income taxes payable | 18,000 |
| Cash generated by operations | $1,836,385 |
| Investing activities | Amount |
| Purchase of bonds held to maturity | ($1,043,295) |
| Investment in Hudson Thin Films | (2,400,000) |
| Purchase of equity securities | (310,000) |
| Capital expenditures | (1,900,000) |
| Proceeds from sale of equipment | 205,000 |
| Net cash used by investing activities | ($5,448,295) |
| Financing activities | Amount |
| Proceeds from bonds issued | $3,000,000 |
| Repayment of term loan | (800,000) |
| Dividends paid | (600,000) |
| Purchase of treasury stock | (350,000) |
| Net cash provided by financing activities | $1,250,000 |
| Net decrease in cash | ($2,361,910) |
| Cash, January 1 | 3,801,910 |
| Cash, December 31 | $1,440,000 |
Explaining the Adjustments
Several adjustments come from earlier assignments. The bond bought at a premium pays $60,000 of coupon cash while interest revenue is only $52,165, so the $7,835 difference is added back. Palisades recorded $285,000 of income from Hudson Thin Films but received only $100,000 in dividends, so the undistributed $185,000 is subtracted. The deferred tax expense of $195,300 reduced income without cash, mostly as the loss carryforward asset was used. Palisades contributed $47,500 more to its pension plan than it expensed, a cash outflow beyond expense. And the $166,250 received from the drone maker ahead of performance increased cash before revenue was recognized.
Noncash Activities and Supplemental Information
Palisades obtained a right-of-use asset of $48,871 for the delivery truck lease in exchange for a lease liability and transferred a coating machine carried at $800,000 to a customer under a sales-type lease in exchange for a lease receivable of $918,253, both disclosed as noncash activities. Interest paid was $410,000 and income taxes paid were $28,200.
IFRS Application
If Palisades reported under IFRS and classified interest paid as financing and dividends received as investing, operating cash flow would rise by $410,000 and fall by $100,000, to $2,146,385. The flexibility makes cross-company comparisons harder. The IASB's new presentation standard, IFRS 18, removes some of these choices for most companies from 2027, generally requiring interest and dividends received to be investing and interest paid to be financing (International Accounting Standards Board [IASB], 2024). Dechow et al. (1998) showed that accruals improve earnings as a performance measure over raw cash flows, but users still need cash flow classifications that are comparable, which is the problem IFRS 18 addresses.
Readers often subtract capital spending from operating cash to get free cash flow, a rough gauge of what is left to pay owners or retire debt. The direct method, which lists cash received from customers and paid to suppliers and employees, is encouraged by both boards but rarely used; companies that adopt it under U.S. GAAP must still provide the indirect reconciliation. For Palisades, the reconciliation is where the noncash items from earlier modules, the bond premium, equity method income, deferred taxes and pension funding, become visible.
That flexibility is ending. IFRS 18, effective in 2027, requires companies whose main business is not investing or lending to classify interest paid as financing and interest and dividends received as investing, which will make IFRS cash flow statements more comparable with one another, though still not identical to U.S. GAAP.
| Item | U.S. GAAP | IAS 7 |
|---|---|---|
| Interest paid | Operating | Operating or financing, applied consistently |
| Interest and dividends received | Operating | Operating or investing |
| Dividends paid | Financing | Operating or financing |
| Income taxes paid | Operating | Operating unless specifically identified with investing or financing |
| Bank overdrafts repayable on demand | Financing | May be included in cash |
References
Dechow, P. M., Kothari, S. P., & Watts, R. L. (1998). The relation between earnings and cash flows. Journal of Accounting and Economics, 25(2), 133-168. https://doi.org/10.1016/S0165-4101(98)00020-2
International Accounting Standards Board. (2024). IFRS 18 presentation and disclosure in financial statements. IFRS Foundation.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2012). Intermediate accounting (14th ed.). John Wiley & Sons.
Reading the ACC 6010 Module 7 assignment instructions
The cash flow statement is the whole of Written Assignment 7, and its final question asks where IAS 7 lets interest and dividends sit. The set usually asks for a full indirect-method statement, sometimes with a worksheet or a direct method operating section, handle items such as equity method income, bond premium or discount amortization, deferred taxes, pensions and gains on sales, disclose noncash activities and compare the U.S. classifications with IAS 7. Nothing here comes from a real company's books; the figures come from the invented company used throughout the course, so its adjustments can be traced to earlier assignments.
Inside the ACC 6010 Module 7 example
The introduction explains the purpose of the statement and states the change in cash. The statement appears in three tables, one per section, with each operating adjustment labeled by the transaction that caused it. A section explains the adjustments that come from earlier assignments, including the direction of each. Noncash activities and supplemental payments follow. The IFRS application compares five classification rules, computes how operating cash flow would change under the IAS 7 choices and notes how IFRS 18 narrows those choices from 2027, with research on why comparable classifications matter. The noncash disclosures follow the statement, and a final note explains where IFRS would classify interest and dividends differently.
Where the marks sit in the ACC 6010 Module 7 rubric
The cash flow statement is the seventh of nine graded assignments, which together count 60 percent. On a cash flow assignment, mentors check that each adjustment has the right direction, that equity method income, premium amortization and deferred taxes are handled correctly, that gains are removed from operating activities and their proceeds placed in investing, that noncash activities are disclosed rather than included and that the net change agrees with the change in cash. IFRS answers should state the IAS 7 choices accurately and their effect. A statement that reconciles to the cash balance is the clearest evidence of accuracy. Each line should trace to a balance or event from earlier modules.
ACC 6010 Module 7 help from the desk
Indirect-method answers go wrong when equity method income is added rather than its undistributed part subtracted, when the sign on bond amortization is flipped and when a gain on selling equipment is left inside operating cash. For each adjustment, ask whether income was higher or lower than the cash it represents. Remember that a bond premium on an investment means cash received exceeds revenue. Disclose leases and other noncash exchanges separately. Reconcile the change in cash shown by the statement to the balance sheet before submitting; a gap points to a missed item. Check that every noncash transaction appears in the supplemental disclosure rather than in the statement itself. Send your own cash flow problem for a free first sample.
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ACC 6010 Module 7 questions, answered
Where can I find a free ACC 6010 Module 7 sample paper?
The Palisades Optical cash flow assignment is shown above: a full indirect-method statement with every adjustment explained, noncash disclosures and an IAS 7 comparison.
How is bond premium amortization on an investment shown in the indirect method?
It is added back, because the cash coupon received exceeds the interest revenue recognized.
How does IAS 7 classify interest paid?
As operating or financing, at the company's choice applied consistently; U.S. GAAP requires operating.
What does IFRS 18 change for cash flow statements?
For most companies, it generally requires interest and dividends received to be investing and interest paid to be financing, removing earlier choices.
Why is equity method income subtracted in the indirect method?
Because Palisades booked its share of the investee's profit without collecting it; only the dividends actually received brought in cash.