Attempts: 2 Do No Harm: 2/4 8. Statement of cash flows The statement of cash flows categorizes a firm's cash flows according to the nature of the activities that give rise to them (for example, operating, investing, and financing cash flows) and then further differentiates these activities and cash flows into whether they involve sources and uses of cash. Two methods can be used to construct a statement of cash flows: the direct method and the indirect method. Under the indirect method, data from three financial statements are used. Under the indirect method, an increase in an asset account (excluding the cash and cash equivalent account) reflects (or results in) a cash , and a decrease in a liability or equity account represents and gives rise to a cash A firm engages in a variety of activities that generate and require cash payment. The statements below describe examples of these activities. Classify each transaction as to whether it constitutes an operating, an investing, or a financing cash flow. Last month, Intergalactic Broadcasting Co. relaxed its credit standards and the characteristics of the customers who would qualify for credit. Accounts receivable increased by $257,982. This transaction is classified as Tomorrow, Chicago Pork Producers Inc. will close on the sale of its old office building. It is expected to receive $1.25 million for the building net of the sales commission. This transaction is classified as A firm engages in a variety of activities that generate and require cash payment. The statements below describe two examples of these activities. Classify each transaction according to its serving as a source of cash to the firm (cash inflow) or a use of cash (cash outflow). Situation Source Use Intergalactic Broadcasting Co. paid $450,000 in dividends on its 2.50 million common shares outstanding. a O This month, Manchester Mortgage Makers Inc. collected $87,458 in accounts receivable. O