Question

All-Star Automotive Company experienced the following accounting events during Year 1.

1. Performed services for $15,900 cash.
2. Purchased land for $8.900 cash.
3. Hired an accountant to keep the books.
4. Received $49,000 cash from the issue of common stock
5. Borrowed $11,800 cash from State Bank.
6. Paid $5.900 cash for salary expense.
7. Sold land for $11.800 cash.
8. Paid $4.900 cash on the loan from State Bank.
9. Paid $6,100 cash for utilities expense.
10. Paid a cash dividend of $2,900 to the stockholders.
Required
a. Indicate how each of the events would be classified on the statement of cash flows as operating activities (OA), investing activities
(1A), financing activities (FA), or not applicable (NA).

Answer 1

The All-Star Automotive Company's Year 1 accounting events are classified as operating, investing, or financing activities on the statement of cash flows, with some being not applicable.

Step-by-step explanation:

The All-Star Automotive Company's accounting events during Year 1 would be classified on the statement of cash flows as follows:

• Performed services for $15,900 cash - Operating activities (OA).
• Purchased land for $8,900 cash - Investing activities (IA).
• Hired an accountant to keep the books - Not applicable (NA) as it does not directly involve cash flow.
• Received $49,000 cash from the issue of common stock - Financing activities (FA).
• Borrowed $11,800 cash from State Bank - Financing activities (FA).
• Paid $5,900 cash for salary expense - Operating activities (OA).
• Sold land for $11,800 cash - Investing activities (IA).
• Paid $4,900 cash on the loan from State Bank - Financing activities (FA).
• Paid $6,100 cash for utilities expense - Operating activities (OA).
• Paid a cash dividend of $2,900 to the stockholders - Financing activities (FA).