Question

Application Problem 5-1B Indicate whether each of the following items should be classified as an operating, investing, or financing activity on the statement of cash flows. If an item does not belong on the statement, indicate as "NA" (Not applicable). a. Declaration of dividends on common shares, to be paid later b. Payment of dividends on common shares c. Purchase of equipment d. Receipt of cash from the sale of a warehouse e. Receipt of cash through a long-term bank loan f. Interest payments on a long-term bank loan g. Acquisition of land for cash h. Investment in another company by purchasing some of its shares i. Net decrease in accounts payable

Answer 1

Answers : a.) NA, because cash flow statement comprises of only cash transactions b) Financing activitiy ; It is a financing activity because, dividend is paid for the amount which we have been financed from the public. E) Investing activity; if we investing in purchase of equipment it can give returned through operations, therefore it is an investment for the opesations of organisations d) operating activity; It is adjusted in the operating activities section as an entrassdinaly item, because it generally doesn't happen usually e) Financing activity; by taking a long term bank loan we are being - financed for the organisation, therefore it is a financing activity f) Financing activity; Jut- peid on loan takes will be financing activity when the loan is considered as a financing actinly. 9) Acquisition Investing activity; as the land also comes for the investment for the further development of organisation in future b) Investing activity, it will also be a investing activity as it is believed that the other company will also grow in future 3 operating activity; as the accounts payable adjustments made in cash flow from operations, it is a operating activity Thanks