Question

Novak Corporation is preparing its 2017 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2017 statement of cash flows. Code Letter Effect A Added to net income in the operating section D Deducted from net income in the operating section R-I Cash receipt in investing section P-I Cash payment in investing section R-F Cash receipt in financing section P-F Cash payment in financing section N Noncash investing and financing activity (a) Purchase of land and building. (b) Decrease in accounts receivable. (c) Issuance of stock. (d) Depreciation expense. (e) Sale of land at book value. (f) Sale of land at a gain. (g) Payment of dividends. (h) Increase in accounts receivable. (i) Purchase of available-for-sale debt investment. (j) Increase in accounts payable. (k) Decrease in accounts payable. (l) Loan from bank by signing note. (m) Purchase of equipment using a note. (n) Increase in inventory. (o) Issuance of bonds. (p) Redemption of bonds payable. (q) Sale of equipment at a loss. (r) Purchase of treasury stock.

Answer 1

Answer: Please see explanation for answer

Explanation:

Purchase of land and build ===--Cash payment in investing section

Decrease in accounts receivables-----Added to net income in the operating section

Issuance of stock-----Cash receipt in financing section

Depreciation expense-----Added to net income in the operating section

Sale of land at book value-------Cash receipt in investing section

Sale of land at a gain--------Cash receipt in investing section AND deducted from net income in the operating section

Payment of dividends-------Cash payment in the financing section

Increase in accounts receivables-------Deducted from net income in operating section

Purchase of available-for-sale investment-----Cash payment in investing section

Increase in accounts payable-----Added to net income in operating section

Decrease in accounts payable-------Deducted from net income in operating section

Loan from bank by signing note------Cash receipt in financing section

Purchase of equipment using a note-----Non-cash investing and financing activity

Increase in inventory-----Deducted from net income in operating section

Issuance of bonds-----Cash receipt in financing section

Redemption of bonds payable------Cash payment in financing section

Sale of equipment at a loss---Cash receipt in investing section AND added to net income in the operating section

Purchase of treasury stock----Cash payment in financing section

or using the code, we have

a) Purchase of land and building - P-I

b) Decrease in accounts receivable - A

c) Issuance of stock - R-F

d) Depreciation expense - A

e) Sale of land at book value - R-I

f) Sale of land at a gain. - R-I and D

g) Payment of dividends - P-F

h) Increase in accounts receivable - D

i) Purchase of available-for-sale investment - P-I

j) Increase in accounts payable - A

k) Decrease in accounts payable - D

l) Loan from bank by signing note - R-F

m) Purchase of equipment using a note - N

n) Increase in inventory - D

o) Issuance of bonds. - R-F

p) Retirement of bonds payable - P-F

Answer 2

Answer:

a) Purchase of land and building. P_I

(b) Decrease in accounts receivable. A

(c) Issuance of stock. R_F

(d) Depreciation expense. D

(e) Sale of land at book value.  C_I

(f) Sale of land at a gain.  C_I

(g) Payment of dividends. P_F

(h) Increase in accounts receivable. D

(i) Purchase of available-for-sale debt investment. P_I

(j) Increase in accounts payable. A

(k) Decrease in accounts payable. D

(l) Loan from bank by signing note. R_F

(m) Purchase of equipment using a note. Non Cash

(n) Increase in inventory.  D

(o) Issuance of bonds. R_F

(p) Redemption of bonds payable. P_F

(q) Sale of equipment at a loss.  R_I

(r) Purchase of treasury stock. P_F

Explanation:

Added:

increasein current liabilityies, decrease in current asset and non monetary losses.

Decreases:

decreases in current liabilities, increasein current assets and non-monetary gains

Investing: transaction which involves long-term assets or securities

Financing: bond and stock related stocks