Question

2. 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. Operating activities Investing activities Financing activities Clayton Inc. issued new common stock for $550.000, Goldstein Co.'s total finished-goods inventory increased from the previous year Matthews Industries repurchased common stock for $260,000. Hamiton Co. sold property for $71.000 000 ooooo Cutter Coi's total accounts receivable owed by customers on account decreased from the previous year.

Answer 1

Sol :

• Clayton Inc, issued new common stock for $550,000 is a financing activity as the company will receive cash flow against the stock issued and will impact stock holders equity.
• Goldstein Co's total finished -goods inventory increased from the previous year is a operating activity as the the company probably expecting huge demand for its finished product which will lead to positive operating cash flow and will impact net income of the company.
• Matthews Industries repurchased common stock for $260,000 is a financing activity as the company paid cash to its shareholders against their stock and will impact stock holders equity.
• Hamilton Co. sold property for $71,000 is a investing activity as the company will receive cash against the property sold and it will have a impact on non current assets of the company.
• Cutter Co.'s total accounts receivable owed by customers on account decreased from the previous year is a operating activity as the company received more cash from its customers for their credit due.