Question

Exercise 12-1 Indirect: Cash flow classification LO C1 

The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an X in the appropriate column(s). (More than one column may be used.) 

a. Declared and paid a cash dividend

b. Recorded depreciation expense

c. Pald cash to settle long-term note payable

d. Prepaid expenses increased in the year

e. Accounts receivable decreased in the year

f. Purchased land by issuing common stock

9. Inventory increased in the year

h. Sold equipment for cash, yielding a loss

i. Accounts payable decreased in the year

j. Income taxes payable increased in the

Answer 1

Ans. All indications are correct but transaction H (sold equipment for cash, yielding a loss) will affect two columns of cash flow statement.

Sold equipment for cash is an investing activity and equipment is sold on loss so this loss will be shown in the first column Operating activities section of the cash flow statement.