Question

Listed below are several transactions that typically produce either an increase or a decrease in cash. Indicate by letter whether the cash effect of each transaction is reported on a statement of cash flows as an operating (O), investing (I), or financing (F) activity.

a. Sale of Common Stock.
b. Sale of Land
c. Purchase of Treasury Stock
d. Merchandise Sales
e. Issuance of a long-term note payable
f. Purchase of merchandise
g. Repayment of note payable
h. Employee salaries
i. Sale of equipment at a gain.
j. Issuance of bonds

Answer 1

a. Sale of Common Stock.

Classification: Financing activity

b. Sale of Land

Classification: Investing activity

c. Purchase of Treasury Stock

Classification: Financing activity

d. Merchandise Sales

Classification: Operating activity

e. Issuance of a long-term note payable

Classification: Financing activity

f. Purchase of merchandise

Classification: Operating activity

g. Repayment of note payable

Classification:

Financing activity

h. Employee salaries

Classification: Operating activity

i. Sale of equipment at a gain.

Classification: Investing activity

j. Issuance of bonds

Classification: Operating activity