Question

1. Classify the following cash flows as either operating (O), investing (I), or financing (F) activities. a) _____ Sold long-term investments for cash. b) _____ Received cash payments from customers. c) _____ Paid cash for wages and salaries. d) _____ Purchased inventories for cash. e) _____ Paid cash dividends. f) _____ Issued common stock for cash. g) _____ Received cash interest on a note. h) _____ Paid cash interest on outstanding notes. i) _____ Received cash from sale of land at a loss. j) _____ Paid cash for property taxes on building.

Answer 1

Answer:

• a) _F_ Sold long-term investments for cash.

• b) _(O)_ Received cash payments from customers.
• c) _(O)_ Paid cash for wages and salaries.
• d) _(O)_ Purchased inventories for cash.
• e) (F)_ Paid cash dividends.
• f) _(F)_ Issued common stock for cash.
• g) _(O)_ Received cash interest on a note.
• h) _(O)_ Paid cash interest on outstanding notes.
• i) _(I)_ Received cash from sale of land at a loss.
• j) _(O)_ Paid cash for property taxes on building.

Explanation:

• a) _F_ Sold long-term investments for cash.

• e) (F)_ Paid cash dividends.
• f) _(F)_ Issued common stock for cash.

Financial Decision are those what are needed to planning the new financial needs, it's necessary to decide the various scources in the capital mix of the firm.

• b) _(O)_ Received cash payments from customers.
• c) _(O)_ Paid cash for wages and salaries.
• d) _(O)_ Purchased inventories for cash.
• g) _(O)_ Received cash interest on a note.
• h) _(O)_ Paid cash interest on outstanding notes.

• j) _(O)_ Paid cash for property taxes on building.

The operatives decision are related to the organization of the business, which things buys and how to pay it, the managment of stock, accounts receivables / payables

• i) _(I)_ Received cash from sale of land at a loss.

The Investment decision are related to how managed the assets of the company, it includes the amount of assets and composition, these decision are a cost and in a limited quantity.