Question

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29. Which of the following is an investing activity Obtaining a loan in cash. Issuing bonds...

29. Which of the following is an investing activity

Obtaining a loan in cash.

Issuing bonds for cash

Issuing a loan in cash

Receiving a dividend from your investment in another company.

30.

When preparing a Statement of Cash Flows under the indirect method, how does a company account for depreciation expense?

It deducts the depreciation expense for the period from the operating section

It does not make any adjustments for depreciation expense for the period.

It deducts the depreciation expense for the period from the investing section

It adds the depreciation expense for the period to the investing section.

It adds the depreciation expense for the period to the operating section.

31. Marshall Company issued $250,000 stock in exchange for a piece of land. How would Marshall report this transaction on the Statement of Cash Flows?

As a cash outflow for investing activities

As a cash inflow for financing activities

This transaction would not be reported on the Statement of Cash Flows.

Half of the amount would be reported as a cash inflow for financing activities and half would be reported as a cash outflow for investing activities.

Solutions

Expert Solution

Question 29

Correct answer----------Receiving a dividend from your investment in another company.

Obtaining loan,issuing bonds and issuing a loan are financing activities.

Investing activities include purchase and sale of investments, the returns from investments and purchase and sale of fixed assets of the business.

Question 30

Correct answer----------It adds the depreciation expense for the period to the operating section.

Depreciation is added because it reduces operating income but it do not affect cash so in order to get operating cash we add depreciation to get operating cash generated.

Question 31

Correct answer----------This transaction would not be reported on the Statement of Cash Flows.

An item is reported in cash flow if that item involves cash transaction. Purchase of an asset in exchange of stock is not a cash transaction.

Although it could be reported in notes to cash flow as a non cash investing and financing activity.

ekkarill92 answered 1 year ago

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