Question

Classify each of the following transactions as increasing, decreasing, or having no effect on cash flows: a. Prepaying rent for the month Increases cash b. Accruing the wages owed to employees at the end of the month, to be paid on the first payday of the next month increases cash c. Selling bonds to investors No effect d. Buying the company's own shares on the stock market No effect e. Selling merchandise to a customer who uses a debit card to pay for the purchase Increases cash f. Paying for inventory purchased earlier on account Increases cash g. Buying new equipment for cash Increases cash h. Selling surplus equipment at a loss Decreases cash Paying the interest owed on a bank loan Decreases cash 1. Paying the income taxes owed for the year Decreases cash

Answer 1

Transactions Effect on Cash Flows Decrease Reaseon As we will pay cash Expected Cash flow Outflow a Prepaying rent for the month Accruing the wages owed to employees at the b month, to be paid on the first payday of the next month C Selling bonds to investor No effect As there is no effect on the cash flows Not applicable Increase We will receive the cash Inflow Decrease Outfows As we will pay cash to the exisitng shareholders As there is no effect on the cash flows No effect d Buying the company's own shares on the stock market e Selling merchandise to a customer who uses debit card to pay the purchase f Paying for inventory purchased earlier on account 8 Buying new equipment for cash h Selling surplus equipment at a loss Not applicable Outflows Decrease As we will have to pay cash Decrease Outflows Increase Increase As we will have to pay cash As we will revceive the cash for the sales price As we will have to pay cash As we will have to pay cash i Paying the interest owed on a bank loan Paying the income tax owed for the year Decrease Decrease Outflows Outflows