Question

Classifying inflows and outflows of cash Classify each of the following items as an inflow​ (I) or an outflow​ (O) of​ cash, or neither​ (N).Col1 Item Change ($) Cash +100 Accounts payable ?1,000 Notes payable +500 Long-term debt ?2,000 Inventory +200 Fixed assets +400 Col2 Item Change($) Accounts receivable ?700 Net profits +600 Depreciation +100 Long-term debt ?2,000Repurchase of stock +600 Cash dividends +800 Sale of stock +1,000

Answer 1

Step-by-step explanation:

There are three types of activities in the cash flow statement which are described below:

1. Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.

These changes in working capital would be adjusted. Moreover, the depreciation expense is added to the net income

2. Investing activities: It records those activities which include purchase and sale of the long term assets. The purchase is an outflow of cash whereas sale is an inflow of cash

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance. The issue of shares is an inflow of cash whereas redemption and dividend is an outflow of cash.

So, the categorization is shown below:

Cash +100 = cash outflow

Accounts payable -1,000 = cash outflow

Notes payable +500 = cash inflow

Long-term debt -2,000 = cash outflow

Inventory +200 = cash outflow

Fixed assets +400 = cash outflow

Accounts receivable -700 = cash inflow

Net profits +600 = cash inflow

Depreciation +100 = cash inflow

Repurchase of stock +600 = cash outflow

Cash dividends +800 = cash outflow

Sale of stock +1,000 = cash inflow