Question

1. Identitying Investing or Financing Cash Flows Indicate items from the following list that would be included in the financing or investing activities section of the statement of cash flows. Indicate whether items would be added or subtracted in these sections. a. Patent amortization recognized amounted to $30,000. b. Plant assets costing $4,000 were purchased with cash. c. Sold a long-term investment in another company's common stock for $5,000. d. Borrowed $40,000 cash for capital projects on a note payable. (Hint: Loan proceeds are received and used to purchase property, plant, and equipment from entities other than the lender.) e. Paid a cash dividend of $5,000. f. Depreciation recognized amounted to $80,000. g. Purchased land for $85,000 cash. h. Issued common stock, $1 par, for $200,000. i. Purchased a 3-month U.S. Treasury bill, $5,000. The company's accounting policy treats such securities as cash equivalents. j. Purchased a patent for $5,000. k. Purchased treasury stock, $3,500. Note: If an item is not included in the Financing or Investing activities section, enter "N/A" in the added or subracted column.

Answer 1

Items b, c, d, e, g, h, j, and k are included in the financing or investing activities section of the cash flow statement, where plant assets and land purchases, patent acquisitions, and treasury stock purchases are subtracted from investing or financing activities, while proceeds from selling investments and issuing stock or borrowing are added.

Step-by-step explanation:

Identifying the items listed by the student within the financing or investing activities section of the statement of cash flows:

• a. Patent amortization: N/A
• b. Plant assets purchased with cash: Subtract from Investing Activities
• c. Sold long-term investment: Add to Investing Activities
• d. Borrowed cash on a note payable: Add to Financing Activities
• e. Paid cash dividend: Subtract from Financing Activities
• f. Depreciation: N/A
• g. Purchased land for cash: Subtract from Investing Activities
• h. Issued common stock: Add to Financing Activities
• i. Purchased 3-month U.S. Treasury bill: N/A (treated as cash equivalents)
• j. Purchased a patent: Subtract from Investing Activities
• k. Purchased treasury stock: Subtract from Financing Activities