Chapter 14: Classifying items on the indirect statement of cash flows

Learning Objective 1, 2

Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to consider in preparing the statement:

a. Increase in accounts payable

b. Payment of dividends

c. Decrease in accrued liabilities

d. Issuance of common stock

e. Gain on sale of building

f. Loss on sale of land

g. Depreciation expense

h. Increase in merchandise inventory

i. Decrease in accounts receivable

j. Purchase of equipment

k. Acquire land and a building by issuance of notes payable

Identify each item as a(n):

Operating activityaddition to net income or subtraction from net income

Investing activitycash inflow or cash outflow

Financing activitycash inflow or cash outflow

Non-cash investing and financing activity (NIF)

Activity that is not used to prepare the indirect statement of cash flows (N)