Question

Review the transactions listed below for thyme advertising company, and classify each transaction as either an operating activity, investing activity, or financing activity, or if no cash is exchanged, as a non-cash event. 1. issued common stock to investors in exchange for cash received from investors. entry field with incorrect answer now contains modified data 2. paid monthly rent. entry field with correct answer 3. received cash from customers when service was performed. entry field with correct answer 4. billed customers for services performed. entry field with correct answer 5. paid dividend to stockholders. entry field with incorrect answer now contains modified data 6. incurred advertising expense on account. entry field with correct answer 7. received cash from customers billed in (4). entry field with correct answer 8. purchased additional equipment for cash. entry field with correct answer 9. purchased equipment on account.

Answer 1

Answers:

1. Financing Activity

2. Operating Activity

3. Operating Activity

4. Non Cash Activity

5. Financing Activity

6. Non Cash Activity

7. Operating Activity

8. Investing Activity

9. Non Cash Activity

What to remember:

Operating activities are the kinds of activities the company accomplishes to generate profits. This includes cash out flows and inflows.

Investing activities contain the purchase or sale of long-lived assets used in operating the business, or the purchase or sale of investment securities (stocks and bonds of companies other than Thyme).

Financing activities are borrowing money, issuing shares of stock, and paying dividends.