Question

Classify the following cash flows as either operating, investing, or financing activities assume indirect method.1. Received cash from sale of equipment. 2. Cash paid to purchase long-term investments. 3. Received cash from long-term debt issuance. 4. Issued preferred stock for cash. 5. Paid cash dividends. 6. Received cash payments from customers. 7. Purchased inventories with cash. 8. Paid cash interest on outstanding notes. 9. Paid cash for utilities. 10. Sold stock investments for cash.

Answer 1

Answer and Explanation:

The classification is as follows

1. Investing activities  : Since there is cash received from the sale of equipment so the same is to be shown in the investing activities in a positive amount

2. Investing activities : Since there is cash paid for buy the long term investment so the same is to be shown in the investing activities in a negative amount

3. Financing activities : Since the cash is received so the same is to be shown in the financing activities in a positive amount

4. Financing activities  : Since the issuance of preferred stock is there so the same is to be shown in the financing activities in a positive amount

5. Financing activities  : Since the cash is paid so the same is to be shown in the financing activities in a negative amount

6. Operating activities : Since the cash is received so the same is to be shown in the operating activities in the direct method as a positive amount  

7. Operating activities  : Since the inventories are purchased so the same is to be shown in the operating activities in the direct method as a negative amount  

8. Operating activities : Since the cash is paid so the same is to be shown in the operating activities in the direct method as a negative amount  

9. Operating activities  : Since the cash is paid so the same is to be shown in the operating activities in the direct method as a negative amount  

10. Investing activities : Since the investment is sold  so the same is to be shown in the investing activities in a positive amount