Question

3. Statement of cash flows The statement of cash flows categorizes a firm's cash flows according to the nature of the activities that give rise to them (for example, operating, investing, and financing cash flows) and then further differentiates these activities and cash flows into whether they involve sources and uses of cash. Two methods can be used to construct a statement of cash flows: the direct method and the indirect method. Under the indirect method, data from three financial statements are used. These statements include and Afirm engages in a variety of activities that generate and require cash payment. The boxes below describe examples of these activities. Classify each transaction as to whether it constitutes an operating, an investing, or a financing cash flow.. Over the month, Intergalactic Broadcasting Co. has collected $95,300 in sales tax. The obligation is due to the state in three days. Today, the company wrote and mailed a check to the state's Sales Tax Department. This transaction is classified as Chicago Pork Producers Inc. sold its old computer system for $70,000. This transaction is classified as Afirm engages in a variety of activities that generate and require cash payment. The boxes below describe two examples of these activities. Classify each transaction according to its serving as a source of cash to the firm (cash inflow) or a use of cash (cash outflow). Source Use Situation Last month, Manchester Mortgage Makers Inc, purchased $23.452 worth of office supplies on credit. During the year, Intergalactic Broadcasting Co. relocated its corporate headquarters and purchased a new office building. Grade It Now Save & Continue Continue without saving

Answer 1

These statements include

Income Statement, Statement of Stockholders’ Equity (Retained Earnings) and Balance Sheet

Collection of Sales tax - Operating activity

Sale of Old computer system - Investing activity

Explanation:

Collection of sales tax and payable to State’s sales tax department is operating activity

Sale of fixed assets is Investing activity

Situation

Purchase of Office supplies on credit – Source

Purchase a new office building- Use

Explanation:

Purchase of office supplies on credit increases the cash and hence it is source

Purchase a new office buildings is utilisation of cash and hence it is use