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For each of the following, identify whether it would be disclosed as an operating (O), financing...

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method. a. Purchased treasury stock b. Dispose of equipment c. Net income d. Sold long-term investments e. Issued common stock f. Depreciation expense

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Answer #1

Ans. A Purchase of treasury stock - financing activities

Explanation: This transaction is shown with negative sign in financing activities.

Ans. B Dispose of equipment - Investing activity.

Explanation: Transactions related to long term assets affect the section of investing activities.

Ans. C. Net income - Operating activities

Explanation: Operating activities (indirect method) section is started with net income.

Ans. D Sold long term investments - Investing activities

Explanation: Sales or purchase of long term investments are listed under investing activities section of cash flow statement.

Ans. E. Issued common stock - Financing activities

Explanation: Issue or redemption of common (or preferred) stock are the part of financing activities.

Ans. F. Depreciation expenses - Operating activities

Explanation: Non cash expenses are added to net income when indirect method of Operating activities is used.

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