The following is a list of transactions that took place during the year:

Instructions
(a) Classify each of the above transactions as an operating activity (O), investing activity (I), financing activity (F), or non cash investing and financing activity (NC). If it does not fit into one of these classifications, indicate that there is no effect (NE). The first one has been done for you as an example.
(b) Specify if the transaction will result in a cash receipt (+), cash payment (-), or have no effect on cash (NE).
(c) Indicate if the transaction will increase (+), decrease (-), or have no effect (NE) on profit.
(d) Explain how it is possible for the same transaction to affect cash and profit differently?

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Classification Cash Flow Profit 1. Paid salaries to employees. 2. Sold land for cash, at a gain. 3. Purchased a building by making a down payment in cash and signing a mortgage payable for the balance. 4. Made a principal repayment on the mortgage. 5. Paid interest on the mortgage. 7. Purchased shares of another company to be held as a long-term non-strategic investment. 8. Paid dividends to shareholders. 9. Sold merchandise inventory on account, at a price greater than cost. The company uses a perpetual inventory system Wrote down the cost of the remaining inventory to its net 10.