Question

Listed below are several transactions that typically produce either an increase or a decrease in cash. Indicate by letter whether the cash effect of each transaction is reported on a statement of cash flows as an operating (O), investing (I), or financing (F) activity.

Transactions:
____ Sale of preferred stock
____ Sale of equipment
____ Purchase of treasury stock
____ Merchandise sales
____ Issuance of a short-term note payable
____ Purchase of inventory
____ Repayment of note payable
____ Employee salaries
____ Sale of land
____ Issuance of bonds
____ Acquisition of bonds of another corporation
____ Payment of semiannual interest on bonds payable
____ Payment of a cash dividend
____ Purchase of an office building
____ Collection of non trade note receivable (principal amount)
____ Loan to another company
____ Purchase of the company shares for their retirement
____ Payment of income taxes
____ Issuance of a long-term note payable
____ Sale of a patent

Answer 1

_ (F)_ Sale of preferred stock

__(I)__ Sale of equipment

__(F)__ Purchase of treasury stock

__(O)__ Merchandise sales

__(F)__ Issuance of a short-term note payable

__(O)__ Purchase of inventory

__(F)__ Repayment of note payable

_(O)___ Employee salaries

__(I)__ Sale of land

__(F)__ Issuance of bonds

__(I)__ Acquisition of bonds of another corporation

__(F)__ Payment of semiannual interest on bonds payable

__(F)__ Payment of a cash dividend

__(I)__ Purchase of an office building

__(O)__ Collection of non trade note receivable (principal amount)

__(I)__ Loan to another company

_(F)___ Purchase of the company shares for their retirement

__(O)__ Payment of income taxes

__(F)__ Issuance of a long-term note payable

__(I)__ Sale of a patent

Step-by-step explanation:

_ (F)_ Sale of preferred stock

__(I)__ Sale of equipment

__(F)__ Purchase of treasury stock

__(O)__ Merchandise sales

__(F)__ Issuance of a short-term note payable

__(O)__ Purchase of inventory

__(F)__ Repayment of note payable

_(O)___ Employee salaries

__(I)__ Sale of land

__(F)__ Issuance of bonds

__(I)__ Acquisition of bonds of another corporation

__(F)__ Payment of semiannual interest on bonds payable

__(F)__ Payment of a cash dividend

__(I)__ Purchase of an office building

__(O)__ Collection of non trade note receivable (principal amount)

__(I)__ Loan to another company

_(F)___ Purchase of the company shares for their retirement

__(O)__ Payment of income taxes

__(F)__ Issuance of a long-term note payable

__(I)__ Sale of a patent

Where (O), (F), (I) represent the net operating, financing and investing activities respectively.