Question
For each of the following transactions on the statement of cash flows, indicate whether it would appear in the Operating Activities section (O), in the
For each of the following transactions on the statement of cash flows, indicate whether it would appear in the Operating Activities section (O), in the Investing Activities section (I), or in the Financing Activities section (F). Assume the use of the direct method in the Operating Activities section.
____ 1. Repayment of long-term debt
____2. Purchase of equipment
____3. Collection of customer’s account
____4. Issuance of common stock
____5. Purchase of another company
____6. Payment of dividends
____7. Payment of income taxes
____8. Sale of equipment
II. For each of the following items, indicate whether it would appear on a statement of cash flows prepared using the direct method (D) or the indirect method (I).
____1. Net income
____2. Increase in accounts receivable
____3. Collections on accounts receivable
____4. Payments on accounts payable
____5. Decrease in accounts payable
____6. Depreciation expense
____7. Gain on early retirement of bonds
____8. Cash sales
III. Fill in the blank for each of the following situations.
Balance Sheet Beginning Ending Income Statement Cash Inflow
(Outflow)
1. Accounts receivable $2,000 $5,000 Sales on account, $15,000 $_________
2. Prepaid insurance $4,000 $3,000 Insurance expense, $7,000 $_________
3. Income taxes payable $6,000 $9,000 Income tax expenses, $20,000 $________
IV. For each of the following items, indicate whether it would be added to (A) or deducted from (D) net income to arrive at net cash flow provided by operating activities under the indirect method.
_____1. Increase in accounts receivable
_____2. Decrease in prepaid rent
_____3. Decrease in inventory
_____4. Decrease in accounts payable
_____5. Increase in income taxes payable
_____6. Depreciation expense
_____7. Gain on sale of equipment
_____8. Loss on early retirement of bonds
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