Indicate which of the following current assets and current liabilities are operating accounts (O) and thus...

Indicate which of the following current assets and current liabilities are operating accounts (O) and thus included in the adjustment of net income to cash flow from operating activities and which are cash (C), investing (I), or financing (F) accounts. (a) Accounts payable

(b) Accounts receivable

(c) Notes payable (to bank)

(d) Marketable securities

(e) Accrued expenses

(f) Inventory

(g) Prepaid expenses

(h) Current portion of long-term debt

(i) Dividends payable

(j) Income taxes payable

(k) Interest payable

(l) Certificates of deposit

Expert Solution

Accounts	Classification
(a) Accounts payable	O
(b) Accounts receivable	O
(c) Notes payable (to bank)	F
(d) Marketable securities	I
(e) Accrued expenses	O
(f) Inventory	O
(g) Prepaid expenses	O
(h) Current portion of long-term debt	F
(i) Dividends payable	O/F
(j) Income taxes payable	O
(k) Interest payable	O
(l) Certificates of deposit	C

Notes

Do not get confused with point (h) above. Current portion of Long term debt may be classified as current liability in balance sheet but it’s a financing activity as per cash flow statement.
Dividend paid is financing but Dividend payable is an operating activity adjustment. Although we adjust balance in dividend payable to calculate actual cash paid for dividend in vesting activity. So alternatively Dividend payable can be classified as financing too.
Certificate of Deposit is not an investment but equals to cash.

Please leave a comment below for any more clarification.

ekkarill92 answered 2 years ago

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