Question

Each of these items must be considered in preparing a statement of cash flows for Pharoah Company. for the year ended December 31, 2022. For each item, state how it should be shown in the statement of cash flows for 2022.

(a) Issued bonds for $190,000 cash. Choose the type of cash inflows and outflows
(b) Purchased equipment for $171,000 cash. Choose the type of cash inflows and outflows
(c) Sold land costing $19,000 for $19,000 cash. Choose the type of cash inflows and outflows
(d) Declared and paid a $47,500 cash dividend. Choose the type of cash inflows and outflows

Answer 1

The items should be shown as cash inflows or outflows in the statement of cash flows for 2022.

Step-by-step explanation:

(a) Issued bonds for $190,000 cash. This would be shown as a cash inflow under financing activities since the issuance of bonds is a way for the company to raise funds.

(b) Purchased equipment for $171,000 cash. This would be shown as a cash outflow under investing activities because the purchase of equipment is considered a capital expenditure and decreases the company's cash.

(c) Sold land costing $19,000 for $19,000 cash. This would be shown as a cash inflow under investing activities because the sale of land generates cash for the company.

(d) Declared and paid a $47,500 cash dividend. This would be shown as a cash outflow under financing activities because the payment of dividends reduces the company's cash.