Question

Classify the following cash flows as either operating, investing, or financing activities assume indirect method.1. Received cash from sale of equipment. 2. Cash paid to purchase long-term investments. 3. Received cash from long-term debt issuance. 4. Issued preferred stock for cash. 5. Paid cash dividends. 6. Received cash payments from customers. 7. Purchased inventories with cash. 8. Paid cash interest on outstanding notes. 9. Paid cash for utilities. 10. Sold stock investments for cash.

Answer 1

The cash flows can be classified as operating, investing, or financing activities. Examples include received cash from sale of equipment (investing), cash paid to purchase long-term investments (investing), received cash from long-term debt issuance (financing), issued preferred stock for cash (financing), paid cash dividends (financing), received cash payments from customers (operating), purchased inventories with cash (operating), paid cash interest on outstanding notes (operating), paid cash for utilities (operating), and sold stock investments for cash (investing).

Step-by-step explanation:

The classification of the cash flows as operating, investing, or financing activities can be determined based on the nature of the transactions. Here is the classification for the given cash flows:

Received cash from sale of equipment - Investing activity

Cash paid to purchase long-term investments - Investing activity

Received cash from long-term debt issuance - Financing activity

Issued preferred stock for cash - Financing activity

Paid cash dividends - Financing activity

Received cash payments from customers - Operating activity

Purchased inventories with cash - Operating activity

Paid cash interest on outstanding notes - Operating activity

Paid cash for utilities - Operating activity

Sold stock investments for cash - Investing activity