Classifying items on the indirect statement of cash flows [5-10 min]
The cash flow statement categorizes like transactions for optimal reporting.
a. | Loss on sale of land. | i. | Cash sale of land. |
b. | Acquisition of equipment by issuance of note payable. | j. | Issuance of long-term note payable to borrow cash. |
c. | Payment of long-term debt. | k. | Depreciation. |
d. | Acquisition of building by issuance of common stock. | i. | Purchase of treasury stock. |
e. | Increase in salary payable. | m. | Issuance of common stock. |
f. | Decrease in inventory. | n. | Increase in accounts payable. |
g. | Increase in prepaid expenses. | o. | Net income. |
h. | Decrease in accrued liabilities. | p. | Payment of cash dividend. |
Requirement
1. Identify each of the following transactions as one of the following:
For each cash flow, indicate whether the item increases (+) or decreases (-) cash. The indirect method is used to report cash flows from operating activities.• Operating activity (O)
• Investing activity (I)
• Financing activity (F)
• Noncash investing and financing activity (NIF)
• Transaction that is not reported on the statement of cash flows (N)
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