1. If the purchase of certificates of deposit is not an investing activity, are they reported in the statement of cash flows? Are CDs non-operating assets? (Note: This is not an investing activity.)
2. How are payments to investors in debt securities (interest) and payments to investors in equity securities (dividends) classified in a statement of cash flows? Is this a conceptual inconsistency? Explain.
3. Suppose a business had been acquired not with cash, but by exchange for debt securities. Would such a transaction be reported in the statement of cash flows? Explain.