Each of the items below must be considered in preparing a statement of cash flows for Alpha-Omega Co. for the year ended Decembe
r 31, 2014. For each item, state how it should be shown in the statement of cash flows for 2014.a. Issued bonds for $150,000 cash.b. Purchased equipment for $200,000 cash.c. Sold land costing $50,000 for $50,000 cash.d. Declared and paid a $20,000 cash dividend.
Answer: a) Financing Activity b) Investing Activity c) Investing Activity d) Financing Activity.
Explanation:
In the Cash Flow Statement there are 3 types of Activities, namely:
1) Operating Activity: This is for revenue and expenses that are accounted for calculation of Net Income.
2) Investing Activity: This includes the purchase and sale of assets: property, plant and equipment.
3) Financing Activity: This includes cash inflows from issuance of bonds, stocks and it also includes cash outflow from paying dividends to stockholders.
