Question

Selected transactions for the Hamilton Company are listed below.1. Collected accounts receivable.2. Declared and paid dividends on common stock.3. Sold long-term investments for cash.4. Issued stock for equipment.5. Repaid five year note payable.6. Paid employee wages.7. Converted bonds payable to common stock.8. Acquired long-term investment with cash.9. Sold buildings and equipment for cash.10. Sold merchandise to customers.Instructions
Classify each transaction as either (a) an operating activity, (b) an investing activity, (c) a financing activity, or (d) a noncash investing and financing activity.

Answer 1

Answer:

1. Collected accounts receivable =  (a) an operating activity

2. Declared and paid dividends on common stock = (c) a financing activity

3. Sold long-term investments for cash = (b) an investing activity

4. Issued stock for equipment = (d) a noncash investing and financing activity

5. Repaid five year note payable = (c) a financing activity

6. Paid employee wages = (a) an operating activity

7. Converted bonds payable to common stock = (d) a noncash investing and financing activity.

8. Acquired long-term investment with cash = (b) an investing activity

9. Sold buildings and equipment for cash = (b) an investing activity

10. Sold merchandise to customers = (a) an operating activity

Explanation:

The Operating Activities include those activities that occurs within the course of business.

The Investing Activities include any cash movement in capital expenditure items.

The Financing Activities included activities that involve sourcing of funds and changes in ownership activities.