Question

Listed below are several transactions. For each transaction, indicate whether the cash effect of each transaction is reported in a statement of cash flows as an operating, investing, financing, or noncash activity. Also, indicate whether the transaction is a cash inflow or cash outflow, or has no effect on cash. The first answer is provided as an example.
1. Payment of employee salaries.
2. Sale of land for cash.
3. Purchase of rent in advance.
4. Collection of an account receivable.
5. Issuance of common stock.
6. Purchase of inventory
7. Collection of notes receivable.
8. Payment of income taxes.
9. Sale of equipment for a note receivable.
10. Issuance of bonds.
11. Loan to another firm.
12. Payment of a long-term note payable.
13. Purchase of treasury stock.
14. Payment of an account payable.
15. Sale of equipment for cash.

Answer 1

Answer:

  Transaction                                          Type of Activity        Cash Inflow or

                                                                                                    Cash Outflow

1 Payment of employee salaries            Operating                  Cash outflow

2. Sale of land for cash                           Investing                    Cash Inflow

3. Purchase of rent in advance              investing                    Cash outflow

4.Collection of an account receivable   Operating                  Cash inflow

5.Issuance of common stock                  Financing                   Cash inflow

6.Purchase of inventory                          Operating                   Cash outflow

7.Collection of notes receivable             Investing                   Cash inflow

8.Payment of income taxes                    Operating                  Cash outflow

9. Sale of equipment for a note recei.    Non cash                  No effect

10. issuance of bonds                              Financing                  Cash inflow

11. Loan to another firm                           Investing                   Cash outflow

12. Payment of a long term note pay.     Financing                 Cash outflow

13. Purchase of treasury stock                Financing                 Cash outflow

14. Payment of an account payable        Operating                Cash outflow

15. Sale of equipment for cash              Investing                     Cash inflow        

Explanation:

Statement of cash flows shows the cash generated and expended by an entity during an accounting period. The statement divides the inflow and outflow of cash into three sections: operating, investing and financing activities.

Operating activities contain activities relating to cash inflow and outflow  of  entity`s primary operation during a given year. Example of this inflow and outflow are cash receipt from customers and cash payment to vendors.

Investing activities contain activities relating to entity`s investment in assets. Example includes cash received from disposal of an asset.

Financing activities contain activities relating to entity`s relationship with provider of capital like equity owner and debt holder.

Cash inflow refers incoming of cash into the business. Example includes cash received from customers. Cash outflow refers to outgoing of cash from the business.  Example includes cash paid to vendors.