Question

The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows.

1. Issued one million shares of common stock at $20 per share.
2. Paid $75,000 to suppliers for inventory.
3. Paid a dividend of $1 per share to common stockholders.
4. Loaned $50,000 to an employee and accepted a note receivable.

Answer 1

1. Issued one million shares of common stock at $20 per share.

The proceed of the issuance of common stock shall be taken as cash inflow in the financing activities.

2. Paid $75,000 to suppliers for inventory.

The payment made to the suppliers shall be taken as outflow in the operating activities.

3. Paid a dividend of $1 per share to common stockholders.

The payment made to common stockholders shall be taken as outflow in the financing activities.

4. Loaned $50,000 to an employee and accepted a note receivable.

The loan given to employee shall be taken as outflow in the operating activities.