CHAPTER 5-b - Purchasing equipment decreases cash Purchasing fixed assets by issuing debt does not affect cash but it should be shown in a schedule

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CHAPTER 5 5-6 Major investing activities include: a) sales and purchases of property, b) sales and purchases of securities that are long-term investments, c) making and collecting long-term loans . 5-7 Major financing activities include: a) borrowing from (nontrade) creditors, b) repaying (nontrade) creditors, c) issuing equity securities, d) repurchasing equity securities, and e) paying dividends. 5-8 Interest paid or received appears in the operating activities section. Some commentators favor showing interest paid elsewhere since it is associated with financing. 5-9 Only increasing long-term debt increases cash. Both repurchasing common shares and paying dividends decrease cash. 5-10 Selling fixed assets for cash and collecting a loan increase cash.
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Unformatted text preview: Purchasing equipment decreases cash. Purchasing fixed assets by issuing debt does not affect cash, but it should be shown in a schedule of noncash investing and financing activities that is part of the statement of cash flows. 5-11 When liabilities increase, the firm has either raised cash and promised to pay it back later or it has preserved cash rather than paying it out to reduce growing accounts payable. So more liabilities lead to more cash. Likewise, increases in noncash assets require cash. Either cash is spent to get the asset or an asset is recorded instead of receiving cash....
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This note was uploaded on 04/11/2008 for the course ACCT 151 taught by Professor Largay during the Spring '07 term at Lehigh University .

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CHAPTER 5-b - Purchasing equipment decreases cash Purchasing fixed assets by issuing debt does not affect cash but it should be shown in a schedule

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