Question

Brief Exercise 17-01

Each of the items below must be considered in preparing a statement of cash flows for Baskerville Co. for the year ended December 31, 2020. For each item, state how it should be shown in the statement of cash flows for 2020 if the indirect method is used.

(a)		Issued bonds for $200,000 cash.		Cash Outflow from Financing ActivityCash Outflow from Operating ActivityCash Inflow from Operating ActivityCash Inflow from Financing ActivityCash Outflow from Investing ActivityCash Inflow From Investing Activity
(b)		Purchased equipment for $150,000 cash.		Cash Outflow from Operating ActivityCash Inflow from Operating ActivityCash Outflow from Financing ActivityCash Inflow from Financing ActivityCash Outflow from Investing ActivityCash Inflow From Investing Activity
(c)		Sold land costing $20,000 for $20,000 cash.		Cash Outflow from Financing ActivityCash Inflow from Operating ActivityCash Inflow from Financing ActivityCash Inflow From Investing ActivityCash Outflow from Operating ActivityCash Outflow from Investing Activity
(d)		Declared and paid a $50,000 cash dividend.		Cash Outflow from Operating ActivityCash Inflow from Operating ActivityCash Inflow from Financing ActivityCash Outflow from Investing ActivityCash Inflow From Investing ActivityCash Outflow from Financing Activity

Answer 1

Sl.no	Particulars	Answers
a.	Issued bonds for $200,000 cash.	Cash Inflow from Financing Activity
b.	Purchased Equipment for $150,000 cash.	Cash Outflow from Investing Activity
c.	Sold Land $20,000 for $20,000 cash.	Cash Inflow from Investing Activity
d.	Declared and Paid $50,000 cash dividend.	Cash Outflow from Financing Activity

Cash Inflow: Money received by an organization as a result of its operating activities, investment activities, and financing activities.

Cash Outflow: Money paid out by an organization as a result of its operating activities, investment activities, and financing activities.

*Operating activities: It focuses on cash effects on transcation that create revenues and expenses.

*Changes in Noncash Current Assets: Deduct from net income increases in current asset accounts, and Add to

net income decreases in current asset accountss and vice versa.

*Opertaing activities - Indirect Method requires follows adjustments:

1. Non cash charges such as depreciation.

2. Gain and Losses on disposal of plant assets;

3. Changes in current assets and current liabilities asjustments.

*Investing activities: involve cashflows resulting from changes in investments and long-term asset items;
*Financing activities: invlove cashflows resulting from changes in long-term liability and stockholder's equity items.

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