Question

How many of the following transactions are operatingactivities?• Borrowed $50,000 from the bank• Purchased $12,000 in supplies• Provide services to customers for $27,000• Paid the utility bill of $750• Purchased a delivery truck for $12,000• Received $25,000 from issuing common stockA. One.B. TwoC. ThreeD. Four

Answer 1

Answer:

C. Three

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.

So, in the above question, there are 3 transactions which are to be considered as operating activities that includes Purchased $12,000 in supplies, Provide services to customers for $27,000, and Paid the utility bill of $750