Question

A statement of cash flows contains the following sections:

a. net cash flow from operating activities

b. cash flows from investing activities

c. cash flows from financing activities

d. investing and financing activities not affecting cash

A list of items that appear on the statement is provided below:

____ 1. Depreciation expense

____ 2. Proceeds from sale of land at a gain

____ 3. Decrease in accounts payable

____ 4. Conversion of bonds to common stock

____ 5. Payment of dividends, declared last fiscal year

____ 6. Proceeds from issuance of short-term note payable, not relating to operating activities

____ 7. Loss on cash sale of equipment

____ 8. Payment for purchase of a building

____ 9. Bond premium amortization using the effective interest method

____ 10. Issuance of common stock to convert bonds payable

Required:

In the space provided, using the letters (a-d), indicate in which section(s) of the statement of cash flows the preceding items would most likely be classified (indirect method for operating activities). After each item affecting cash, indicate with a plus sign (+) or a minus sign (−) whether the item would be reported as an increase (inflow) or a decrease (outflow).

Answer 1

Answer-

1	Depreciation expense	net cash flow from operating activities	Increase (inflow)	(+)
2	Proceeds from sale of land at a gain	net cash flow from operating activities	Decresae (outflow)	(-)
3	Decrease in accounts payable	net cash flow from operating activities	Decresae (outflow)	(-)
4	Conversion of bonds to common stock	investing and financing activities not affecting cash	None
5	Payment of dividends, declared last fiscal year	cash flows from financing activities	Decresae (outflow)	(-)
6	Proceeds from issuance of short-term note payable, not relating to operating activities	cash flows from financing activities	Increase (inflow)	(+)
7	Loss on cash sale of equipment	net cash flow from operating activities	Increase (inflow)	(+)
8	Payment for purchase of a building	cash flows from investing activities	Decresae (outflow)	(-)
9	Bond premium amortization using the effective interest method	net cash flow from operating activities	Increase (inflow)	(+)
10	Issuance of common stock to convert bonds payable	investing and financing activities not affecting cash	None