Identify the category of the statement of cash flows in which each transaction would be reported.
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(a-g)
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a. Purchased equipment for $130,000 cash.
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Investing activities.
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b. Issued $14 par preferred stock for cash.
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Financing activities.
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c. Cash received from sales to customers of $35,000.
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Operating activities.
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d. Cash paid to vendors, $17,000.
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Operating activities.
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e. Sold building for $19,000 gain for cash.
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Investing activities and operating activities.
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f. Purchased treasury stock for $28,000.
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Financing activities.
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g. Paid a notes payable with 1,250 shares of the company's common stock.
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Noncash investing and financing activity.
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Operating Activities:
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CASH INFLOWS: (O+)
- From customers for the sales of merchandise inventory and services.
- For interest and dividend income.
CASH OUTFLOWS: (O-)
- For the purchase of merchandise inventory and payment of operating expenses.
- For interest expense and income tax expense.
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Investing Activities:
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CASH INFLOWS: (I+)
- From the sale of property, plant, equipment, and investments.
- From the collection of long-term notes receivable.
CASH OUTFLOWS: (I-)
- To purchase property, plant, equipment, and investments.
- For loans made to borrows.
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Financing Activities:
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CASH INFLOWS: (F+)
- From issuance of stock and selling treasury stock.
- For receipt of borrowing money.
CASH OUTFLOWS: (F-)
- For payment of dividends and buying treasury stock.
- For repayments of loans.
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Non-cash Investing and Financing Activities.
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A separate schedule that includes investing and financing activities that do NOT include cash.
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Identify each item as:
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Operating (O), Investing (I), Financing (F), or non-cash (N)
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1. Cash receipt from the sale of equipment.
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Investing.
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2. Cash payment for salaries.
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Operating.
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3. Cash receipt from the collection of long-term notes receivable.
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Investing.
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4. Purchase of equipment in exchange for notes payable.
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Non-Cash.
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5. Cash receipt from the issuance of common stock.
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Financial.
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Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to consider in preparing the statement:
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Identify each item as a(n):
- Operating activity:
additional to net income (O+) or
subtraction from net income (O-)
- Investing activity:
cash inflow (I+) or
cash outflow (I-)
- Financing activity:
cash inflow (F+) or
cash outflow (F-)
- Activity that is not used to prepare the indirect cash flow statement. (N)
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a. Increase in accounts payable.
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O+
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b. Payment of dividends.
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F-
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c. Decrease in accrued liabilities.
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O-
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d. Issuance of common stock.
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F+
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e. Gain on sale of building.
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O-
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f. Loss on sale of land.
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O+
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g. Depreciation expense.
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O+
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h. Increase in merchandise inventory.
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O-
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i. Decrease in account receivable.
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O+
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j. Purchase of equipment.
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I-
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Acquisition of equipment by issuance of note payable.
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NIF
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Payment of long-term debt.
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F-
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Acquisition of building by issuance of common stock
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NIF
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Increase in Salaries Payable.
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O+
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Decrease in Merchandise Inventory
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O+
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Increase in Prepaid Expenses
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O-
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Decrease in Accrued Liabilities
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O-
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Cash sale of land
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I+
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Issuance of long-term note payable to borrow cash.
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F+
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Depreciation
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O+
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Purchase of treasury stock
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F-
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Issuance of common stock
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F+
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Increase in Accounts payable
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O+
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Net Income
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O+
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Payment of cash dividend
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F-
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Long-term Investments:
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2015 - 2014 = Increase (Decrease)
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Which of the following is true of the statement of cash flows?
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It covers a specific span of time the same as the income statement.
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The purchase of equipment financed by a long - term notes payable is an example of
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non - cash investing and financing activity.
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Which of the following sections of the statement of cash flows includes activities that create revenue and expenses of the business?
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The operating section
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The issue of common stock for cash will be shown as a ____.
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Positive cash flow in the financing section of the statement of cash flows.
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Which of the following sections from the statement of cash flows includes the cash paid for the purchase of Treasury Stock?
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The financing section.
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If an investor wants to know the amount of cash available with the company for new opportunities, such as expanding into a new sales region, they would most likely look at _______.
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free cash flow.
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Planned investments and cash dividends are deducted from ____ to arrive at free cash flow.
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net cash provided by operating activities.
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The only part that differs in a statement of cash flows prepared by the direct method from on prepared by the indirect method it the _____.
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Operating activities section
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On a direct method statement of cash flows, cash received from selling merchandise would be considered a ____.
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cash inflow from operating activities.
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Which of the following items would be included as an operating activity on the statement of cash flows, using the direct method?
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payment of interest expense
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