Classification of Cash Flows}

The following are several items that might be disclosed on a company's statement of cash flows presented using the indirect method.

a. Net income

b. Depreciation expense

c. Issuance of common shares

d. Loss on disposal of equipment

e. Purchase of a building

f. Decrease in accounts payable g. Converted bonds into common shares h. Sale of long-term investment i. Payment of interest j. Increase in inventory

\section*{Required:}

1. Indicate whether each item should be classified as a cash flow from operating activities, a cash flow from investing activities, a cash flow from financing activities, or a noncash investing and financing activity.

YOUDECIDE 2. Why is the proper classification of cash flows important?

\section*{OBJECTIVE 3 Exercise