Statement of cash flows transaction classification

Statement of cash flows transaction classification -...

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Statement of cash flows transaction classification You are reviewing the following four items for possible inclusion in the statement of cash flows , direct method. 1. Purchased supplies on account 2. Purchased land by paying cash 3. Issued common stock for cash 4. Paid an account payable Required: a. For each item, determine whether or not the item is used in calculations on the statement of cash flows. b. If the item is included in the statement of cash flows, select the appropriate classification of the item from the pull-down menu and determine whether the item is a source of cash (cash inflow) or a use of cash (cash outflow).
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The statement of cash flows communicates the sources and uses of cash of an entity for a specific period. The statement is divided into three sections: operating activities , investing activities , and financing activities . Operating activities include cash provided by or used within the normal income- producing (operational) activities. These transactions involve cash and are related to transactions that are reported on the income statement. Examples include cash received from customers (from sales or service revenue), cash paid to suppliers (for the purchase of inventory), cash paid for operating expenses (including salaries, rent, insurance, and others), cash paid for interest, and cash paid for taxes. Investing activities include the purchase and sale of non-current assets, investments (excluding trading securities), and the lending and collection of loans. These transactions involve the purchase and sale of assets (not including merchandise inventory, trading securities, and cash equivalents). Examples include proceeds from the sale of, or cash used to purchase, equipment, long-term investments , and buildings. Financing activities include the issuance of stock, issuance and retirement of bonds, long-term debt and current non-operating debt, dividends paid to stockholders, and treasury stock transactions. These transactions involve the issuance and retirement of debt and equity and the return of resources to the stockholders (repurchase of treasury stock and payment of dividends). Examples include issuance of common stock, preferred stock, bonds and other debt; purchase of treasury stock; retirement of debt; and payment of dividends. Note: These solutions relate to the statement of cash flows, direct method. Solutions: 1. Purchased supplies on account: The purchase of supplies on account does not involve cash, so it would not appear in the statement of cash flows. 2.
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Statement of cash flows transaction classification -...

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