Question

ndicate in which part of the statement of cash flows each item would appear: operating activities, investing activities, or financing activities. (a) select a part of the statement of cash flows Cash received from customers. (b) select a part of the statement of cash flows Cash paid to stockholders (dividends). (c) select a part of the statement of cash flows Cash received from issuing new common stock. (d) select a part of the statement of cash flows Cash paid to suppliers. (e) select a part of the statement of cash flows Cash paid to purchase a new office building.

Answer 1

(a) Cash received from customers = Cash flow from operating activities as this is the regular transaction of every business.

(b) Cash paid to stockholders = Cash flow from financing activities as this is the payment for any investment made by shareholders, in return when the shares are matured or treasury stock is purchased then, this is financing activity.

(c) Cash received from issuing new common stock = Cash flow from financing activity, as this will generate funds for the company, therefore it is a financing activity.

(d) Cash paid to suppliers = Cash flow from operating activities, this a regular payment in exchange of goods purchased, cash outflow.

(e) Cash paid to purchase a new office building = Cash outflow from investing activity, as this is an investment capital in nature, and will provide in return capital base or other income in form of rent.