Question

Complete each of the columns on the table below, indicating in which section each item would be reported on the statement of cash flows (operating, investing, or financing), the amount that would be reported, and whether the item would create an increase or decrease in cash. For item that affect more than one section of the statement, indicate all affected. Assume the indirect method of reporting cash flows from operating activities.

The first item has been completed as an example.

Item	Statement Section	Amount to Report	+/– Effect on Cash
Depreciation of $15,000 for the period	Operating	$15,000	Increase
Issuance of common stock for $35,000
Increase in accounts payable of $7,000
Retirement of $100,000 bonds payable at 97
Purchase of long-term investments for $94,500
Dividends declared and paid of $8,300
Increase in prepaid rent of $4,500
Decrease in Inventory of $5,300
Purchase of equipment for $17,600 cash
Sale of land originally costing $134,000 for $130,000
Decrease in taxes payable of $2,100			]

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Answer 1

Item	Statement Section	Amount to Report	+/– Effect on Cash
Depreciation of $15,000 for the period	Operating	$15,000	Increase
Issuance of common stock for $35,000	Financing	$35,000	Increase
Increase in accounts payable of $7,000	Operating	$7000	Increase
Retirement of $100,000 bonds payable at 97	Financing	97,000	Decrease
Purchase of long-term investments for $94,500	Investing	94,500	Decrease
Dividends declared and paid of $8,300	Financing	8,300	Decrease
Increase in prepaid rent of $4,500	Operating	4,500	Decrease
Decrease in Inventory of $5,300	Operating	5,300	Increase
Purchase of equipment for $17,600 cash	Investing	17,600	Decrease
Sale of land originally costing $134,000 for $130,000	Investing	130,000	Increase
Decrease in taxes payable of $2,100	Operating	2,100	Decrease