Question

Cashflow 3) Look at the transactions below What impact do the transaction would have on the cashflow stateme a) indicate which section of the cashflow statement the transaction would be in: -(i) operating activity (ii) investing activity (iii) financing activity (iv) non-cash transaction or (v) not in the cashflow at all. Indicate if the entry would have a positive impact on the change in cash at year-end (i.e. be added back to net income in the cashflow statement) (INC) b) indicate which section of the cashflow statement would have a negative cash effect at year-end (i.e. be subtracted from net income in the cashflow statement) (DECR). Please use a table to set out your work Transaction Section affected Effect 1) Declared and paid cash dividend 2) Purchased long term investment 3) Increase in accounts receivable at year-end. 4) Interest paid 5) Accrued interest for loan 6) Sold equipment at a loss 7) Issued long-term bonds 8) Issued common stock 9) Declared and issued stock dividend 10) Repaid notes payables 11) Decreased wages payable 12) Purchased treasury bill 13) Purchased land 14) Depreciation charge for the year

Answer 1

Solution :-

Transaction	Section Affected	Effect
1. Declared and paid cash dividend	Financing Activity	Negative Effect i.e subtracted from the financing Activity
2.Purchased Long term Investment	Investing Activity	Negative Effect
3.Increase in accounts receivable at year end	Operating Activity	Negative Effect
4. Interest paid	Financing & Operating Activity	Under Financing Activity = Negative Effect Under Operating Activity = Positive Effect
5. Accrued Interest for loan	Non Cash Transaction	When It is paid , then it will be shown under Financing Activity as Negative Effect.
6.Sold Equipment at a loss	Cash Received from sale of equipment will be shown under Investing Activity Loss on sale of Equipment will be shown under Operating Activity	Cash received from sale of Equipment =Positive Effect Loss on sale of Equipment =Positive Effect
7. Issued long term bonds	Financing Activity	Positive Effect
8. Issued common stock	Financing Activity	Positive Effect
9.Declared and issued stock dividend	Financing Activity	Negative Effect
10. Repaid notes payable (Assume Long Term )	Financing Activity	Negative Effect
11.Decreased wages payable	Operating Activity	Negative Effect
12. Purchased treasury bill	Treasury Bills will be treated as part of Cash and Cash Equivalents.	Positive Effect
13.Purchased Land	Investing Activity	Negative Effect
14. Depreciation charge for the year	Operating Activity	Positive Effect