Question

3. Operating, Investing, and financing activities and cash flows The statement of cash flows reports a company's cash inflows and outflows for a given accounting period by categorizing the company's sources and uses of cash as either operating, investing, or financing activities. Determine whether the activities described in the following table should be categorized as operating, investing, or financing activities in the statement of cash flows. activities Investing activities Financing activities Alexander Co. purchased a factory for $920,000. Doran Industries paid preferred dividends of $28,000. Hernandez Co.'s total accounts receivable owed by customers on account decreased from the previous year. Clayton Inc. issued long-term bonds for $370,000 Sutherland Co.'s total finished-goods inventory increased from the previous year Oo oo ooo

Answer 1

Alexander Co. purchased a factory for $920,000	Investing activities; purchase of an asset
Doran Industries paid preferred dividends of $28,000	Financing activities; dividend payment
Hernandez Co.’s total accounts receivable owed by customers on account decreased from the previous year	Operating activities; Cash receipts from customers
Clayton Inc. issued long-term bonds for $370,000	Financing activities; Issue of bonds
Sutherland Co.’s total finished-goods inventory increased from the previous year	Operating activities; Increase in current asset

Anderson Co.’s total raw materials inventory decreased from the previous year	Operating activities; Decrease in current assets
Gibbons Industries paid common dividends of $56,000	Financing activities; dividend payments
Sandler Co. sold property for $71,000	Investing activities; Sale of assets
Martinez Co.’s total accounts payable owed to suppliers on account increased from the previous year	Operating activities; Increase in current liabilities
Lamar Inc. issued new common stock for $550,000	Financing activities; Issue of common stock

Cash Flow from Operating Activities: Shows cash used in or generated from the business activities. E.g. Receipts from sale of products or services; Interest payments; Payments to suppliers of goods; Salaries and wages paid to employees; Tax paid etc.

Cash Flow from Investing Activities: Shows cash used in or generated from the investment activities of the company. E.g. Proceeds from sale of assets; Payment for acquisition of assets etc.

Cash Flow from Financing Activities: Shows cash generated from or used in financing activities. E.g. Proceeds from issue of stock; Dividend payments; Repayment of loans; Issue of bonds etc.