Question

The following are several transactions and events that might be disclosed on a company’s statement of cash flows:

a.	declaration of cash dividends
b.	decrease in account payable
c.	decrease in account receivable
d.	depletion expense
e.	gain on the sale of land
f.	increase in inventories
g.	payment of cash dividends
h.	issuance of preferred stock
i.	net income
j.	purchase of equipment

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Required:

Identify in which section (if any) of the statement of cash flows each of the preceding items would appear and indicate whether it would be reported as an inflow (addition) or an outflow (subtraction).

Answer 1

Identify in which section (if any) of the statement of cash flows each of the preceding items would appear and indicate whether it would be reported as an inflow (addition) or an outflow (subtraction).

		Section	Reported as
a.	declaration of cash dividends	Not reported
b.	decrease in account payable	Cash flow from operating activities	Outflow (subtraction)
c.	decrease in account receivable	Cash flow from operating activities	Inflow (Addition)
d.	depletion expense	Cash flow from operating activities	Inflow (Addition)
e.	gain on the sale of land	Cash flow from operating activities	Outflow (subtraction)
f.	increase in inventories	Cash flow from operating activities	Outflow (subtraction)
g.	payment of cash dividends	Cash flow from financing activities	Outflow (subtraction)
h.	issuance of preferred stock	Cash flow from financing activities	Inflow (Addition)
i.	net income	Cash flow from operating activities	Inflow (Addition)
j.	purchase of equipment	Cash flow from investing activities	Outflow (subtraction)