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  • Jul 3, 2008, 09:17 PM
    poppazoid
    Classification of cash flows
    Which of the three categories would these items fall into: operating (O), investing (I), or financing (F)

    Sale of common stock (F)
    Sale of land (I)
    Purchase of treasury stock (F)
    Merchandise sales (O)
    Issuance of a long-term note payable (F)
    Purchase of merchandise (O)
    Repayment of note payable (O)
    Employee salaries (O)
    Sale of equipment at a gain (O)
    Issuance of bonds (F)
    Acquisition of bonds of another corporation (I)
    Payment of semiannual interest on bonds payable (O)
    Payment of a cash dividend (F)
    Purchase of a building (O)
    Collection of nontrade note receivable (principle amount) (I)
    Loan to another firm (I)
    Retirement of common stock (F)
    Income taxes (O)
    Issuance of a short-term note payable (F)
    Sale of a copyright (I)

    I have indicated my answers in parenthesis. Any help would be appreciated.

    Thank you
  • Jul 4, 2008, 03:05 PM
    morgaine300
    Quote:

    Repayment of note payable (O)
    Correct if it's short-term. Usually if it doesn't indicate otherwise, we assume it is. (But you never know what some textbook is going to do.)

    Quote:

    Sale of equipment at a gain (O)
    That's a bit of a trick question. The gain goes into the operating section when doing the indirect method. But the sale itself (gain or not) is an investing activity. (The reasons a gain would be adjusted in the operating section for indirect is because it doesn't belong there and needs to be removed from the net income figure.)

    Quote:

    Issuance of a short-term note payable (F)
    See note on the other note payable.

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