Question

Prestige Manufacturing Corporation reports the following items in its statement of cash flows presented using the direct method. Indicate whether each item is disclosed in the operating activities (O), investing activities (I), or financing activities (F) section of the statement under GAAP or use (NA) if the item does not appear on the statement.1. Payment for equipment purchase. 2. Repayments of bank loan. 3. Dividends paid 4. Proceeds from issuance of stock. 5. Interest paid. 6. Receipts from customers.

Answer 1

Answer:

1. Payment for equipment purchase =  investing activities (I)

2. Repayments of bank loan = financing activities (F)

3. Dividends paid = financing activities (F)

4. Proceeds from issuance of stock = financing activities (F)

5. Interest paid = operating activities (O)

6. Receipts from customers = operating activities (O)

Explanation:

Operating Activities are activities that generate cash in the ordinary course of business.

Investing Activities are activities that generate cash due to movement in capital expenditure balances

Financing Activities are activities that generate cash due to sourcing of funds or changes in ownership.