Question
Exercise 14-2 on pages 618-619 Operating, investing, or financing activity? The following are several activities that Wallingford Inc. engaged in during 2015: Operating activities include
Exercise 14-2 on pages 618-619 Operating, investing, or financing activity? The following are several activities that Wallingford Inc. engaged in during 2015: Operating activities include the production, sales, and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Investing activities include purchases or sales of an asset (assets can be land, building, equipment, marketable securities, etc.), loans made to suppliers or received from customers, payments related to mergers and acquisitions, and dividends received. Financing activities include the inflow of cash from investors, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities. Exercise 14-2 on pages 618-619 Operating, investing, or financing activity? The following are several activities that Wallingford Inc. engaged in during 2015: 1. Wrote off an open receivable as uncollected would be Operating, investing, or financing activity? 2. Purchased a piece of plant equipment. operating activity 3. Reacquired 5,000 shares of its common stock. 4. Sold a building in exchange for a five-year note. operating activity 5. Declared, but did not pay, a cash dividend. investing activity 6. Retired bonds payable by issuing common stock. 7. Collected on a long-term note receivable. 8. Issued a stock dividend. Financing activity 9. Recorded depreciation on fixed assets. (Assume that the direct method is used.) 10. Paid interest on long-term debt. 11. Purchased inventory on account. 12. Collected open accounts receivable. 13. Exchanged a building for land. 14. Issued 75,000 shares of preferred stock. Purchased a two-year fire insurance policy. Assume that each of these transactions involved cash unless otherwise indicated. Indicate in which section of the statement of cash flows each transaction would be classified. Classify each transaction as one of the following: a. An operating activity b. An investing activity c. A financing activity d. Not included on the statement of cash flows Exercise 14-3 on page 619 Cash management policies across companies Summaries of the 2015 statements of cash flows for five different companies follow. For each company compute the missing dollar amount, and briefly describe the company's cash management policy for 2015. Cash Provided (Used) by Company Operations Investments Financing Net Increase (Decrease) AAA $320 ? $(180) $ (38) BBB 219 $(450) 190 ? CCC ? (414) 80 $(137) DDD 120 (130) ? 420 EEE ? (120) (100) 70
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