Question

Novak Corporation is preparing its 2014 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2014 statement of cash flows.

Code Letter

Effect

A Added to net income in the operating section
D Deducted from net income in the operating section
R-I Cash receipt in investing section
P-I Cash payment in investing section
R-F Cash receipt in financing section
P-F Cash payment in financing section
N Noncash investing and financing activity
(a) Purchase of land and building.
AR-I and DR-IR-F and ADR-F and DP-FP-IR-FNR-I and A

(b) Decrease in accounts receivable.
R-F and AR-FNR-I and DR-I and ADR-F and DAP-FR-IP-I

(c) Issuance of stock.
R-FAR-IDP-FR-F and AP-IR-F and DNR-I and DR-I and A

(d) Depreciation expense.
R-IP-FP-IR-F and DR-FNR-F and AR-I and AR-I and DAD

(e) Sale of land at book value.
R-F and DP-IADR-FR-IP-FNR-I and DR-I and AR-F and A

(f) Sale of land at a gain.
DR-I and DNR-IR-FR-F and AR-I and AR-F and DP-IAP-F

(g) Payment of dividends.
R-I and AP-IP-FDNAR-I and DR-IR-FR-F and DR-F and A

(h) Increase in accounts receivable.
R-F and ANAP-FP-IR-FR-I and DR-IR-I and AR-F and DD

(i) Purchase of available-for-sale investment.
ADR-I and DR-I and AR-F and DR-F and AP-FR-FNR-IP-I

(j) Increase in accounts payable.
R-F and DDR-F and AAR-IP-IR-FNR-I and DP-FR-I and A

(k) Decrease in accounts payable.
R-I and DNP-FR-F and AR-IR-I and AR-F and DDAP-IR-F

(l) Loan from bank by signing note.
R-I and DR-I and ANP-IDP-FR-F and DR-F and AAR-IR-F

(m) Purchase of equipment using a note.
R-F and DP-IR-FR-I and ANR-F and AP-FR-IR-I and DAD

(n) Increase in inventory.
NR-IP-FR-FP-IDR-I and DR-I and AAR-F and AR-F and D

(o) Issuance of bonds.
AP-FR-F and DNR-I and DR-F and ADR-FR-IP-IR-I and A

(p) Redemption of bonds payable.
R-I and DR-I and AR-IR-F and DP-FR-F and ADP-IANR-F

(q) Sale of equipment at a loss.
R-F and DNR-F and AR-I and DADR-I and AR-FR-IP-IP-F

(r) Purchase of treasury stock.

Answer 1

Answer: The answers are provided below

Step-by-step explanation:

a) Purchase of land and building = P-I

This will be a cash payment in investing section

b) Decrease in accounts receivable = A

This will be added to the net income in the operating section

c) Issuance of stock = R-F

This will be a cash receipt in financing section

d) Depreciation expense = A

This will be added to the net income in the operating section

e) Sale of land at book value = R-I

This will be a cash receipt in investing section.

f) Sale of land at a gain = R-I and D

This will be a cash receipt in investing section and deducted from the net income in the operating section

g) Payment of dividends = P-F

This will be a cash payment in financing section

h) Increase in accounts receivable = D

This will be deducted from net income in the operating section

i) Purchase of available-for-sale investment = P-I

This will be a cash payment in investing section

j) Increase in accounts payable = A

This will be added to the net income in the operating section

k) Decrease in accounts payable = D

This will be deducted from net income in the operating section

l) Loan from bank by signing note = R-F

This will be a cash receipt in financing section

m) Purchase of equipment using a note = N

This will be a noncash investing and financing activity

n) Increase in inventory = D

This will be deducted from net income in the operating section

o) Issuance of bonds = R-F

This will be a cash receipt in financing section

p) Retirement of bonds payable = P-F

This will be a cash payment in financing section

q) Sale of equipment at a loss = R-I and A

This will be a cash receipt in investing section and will be added to the net income in the operating section

r) Purchase of treasury stock = P-F

This will be a cash payment in financing section