Classification of Cash Flows
The following are several items that might be disclosed on a company’s statement of cash flows presented using the indirect method.
a. Net income
b.
c. Issuance of common stock
d. Loss on disposal of equipment
e. Purchase of a building
f. Decrease in accounts payable
g. Converted bonds into common stock
h. Sale of long-term investment
i. Payment of interest
j. Increase in inventory
Required:
1. Indicate whether each item should be classified as a cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, or noncash investing and financing activity.
2. CONCEPTUAL CONNECTION Why is the proper classification of cash flows important?
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Chapter 11 Solutions
Cornerstones of Financial Accounting
- Classification of Cash Flows A company's statement of cash flows and the accompanying schedule of investing and financing activities not affecting cash may contain the following major sections: a. Operating Activities b. Investing Activities c. Financing Activities d. Investing and Financing Activities not Affecting Cash The following is a list of items that might appear on a company's statement of cash flows or in the accompanying schedule. Required: Using the letters A through D, indicate in which section of the statement of cash flows (or the accompanying schedule) the preceding item would most likely be classified. After each letter, indicate with a plus (+) or a minus () whether the item would be reported on the statement (or the accompanying schedule).arrow_forwardWhat adjustment(s) should be made to reconcile net income to net cash flows from operating activities (indirect method) considering the following balances in current assets?arrow_forwardClassification of Cash Flows Patel Company reported the following items in its statement of cash flows presented using the indirect method. a. Issuance of common stock b. Cash paid for interest c. Sold equipment for cash d. Receipt of cash dividend on investment e. Repayment of principal on long-term debt f. Loss on disposal of equipment. Required: Indicate whether each item should be classified as a cash flow from operating activities, a cash flow from investing activities, a cash flow from financing activities. Use the following information for Cornerstone Exercises 11-16 and 11-17: A review of the balance sheet of Peterson Inc. revealed the following changes in the account balances: a. Increase in long-term investment b Increase in accounts receivable c. Increase in common stock d. Increase in long-term debt e. Decrease in accounts payable f. Decrease in supplies inventory g. Increase in prepaid insurance h. Decrease in retained earningsarrow_forward
- Use the following information from Acorn Companys financial statements to determine operating net cash flows (indirect method).arrow_forwardUse the following information from Hamlin Companys financial statements to determine operating net cash flows (indirect method).arrow_forwardStatement of cash flowsindirect method The comparative balance sheet of Coulson, Inc. at December 31, 20Y2 and 20Y1, is as follows: The noncurrent asset, noncurrent liability, and stockholders equity accounts for 20Y2 are as follows: Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.arrow_forward
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