Question

Motif Furniture designs and sells modern furniture. For each of the following first-quarter transactions, indicate whether operating (O), investing (), or financing activities (F) are affected and whether the effect is a cash inflow (+) or outflow (-). Activity Cash Flow 1. Bought used equipment for cash 2 Paid cash to purchase new equipment 3. Declared and paid cash dividends to shareholders 4. Collected payments on account from customers 5. Recorded an adjusting entry to record accrued salaries expense Recorded and paid interest on debt to creditors 7. Repaid principal on loan from bank 8. Prepaid rent for the following period 9. Made payment to suppliers on account 6.

Answer 1

Classification

		Activity	Cash flow
1	Bought used equipment for cash	I	O
2	Paid cash to purchase new equipment	I	O
3	Declared and paid cash dividends to shareholders	F	O
4	Collected payments on account from customers
5	Recorded an adjusting entry to record accrued salaries expense
6	Recorded and paid interest on debt to creditors	O	O
7	Repaid principal on loan from bank	F	O
8	Prepaid rent for following period	O	O
9	made payment to suppliers on account	O	O