classify the following cash flows as either operating, investing, or financing activities, assuming the…

classify the following cash flows as either operating, investing, or financing activities, assuming the indirect method.\ncash flow activity\n1. paid cash for a building.\n2. cash paid to purchase investments.\n3. received cash from long - term debt issuance.\n4. paid long - term debt with cash.\n5. received cash payments from customers.\n6. issued common stock for cash.\n7. paid cash for wages and salaries.\n8. received cash interest on a note.\n9. received cash dividends from investments.\n10. paid cash for rent.

classify the following cash flows as either operating, investing, or financing activities, assuming the indirect method.\ncash flow activity\n1. paid cash for a building.\n2. cash paid to purchase investments.\n3. received cash from long - term debt issuance.\n4. paid long - term debt with cash.\n5. received cash payments from customers.\n6. issued common stock for cash.\n7. paid cash for wages and salaries.\n8. received cash interest on a note.\n9. received cash dividends from investments.\n10. paid cash for rent.

Answer

Explanation:

Step1: Recall Cash Flow Categories

  • Operating activities: Cash flows related to main revenue - generating operations (e.g., sales, payments to employees, rent, interest/dividends received in some cases).
  • Investing activities: Cash flows related to purchase/sale of long - term assets (like buildings, investments) and non - operating investments.
  • Financing activities: Cash flows related to capital structure (issuing/buying back stock, issuing/repaying debt).

Step2: Classify Each Cash Flow

  1. Paid cash for a building: Buying a long - term asset. So, Investing.
  2. Cash paid to purchase investments: Investing in non - operating assets. Investing.
  3. Received cash from long - term debt issuance: Raising capital through debt. Financing.
  4. Paid long - term debt with cash: Repaying debt (capital structure change). Financing.
  5. Received cash payments from customers: Revenue from operations. Operating.
  6. Issued common stock for cash: Raising capital through equity. Financing.
  7. Paid cash for wages and salaries: Payment to employees (operations). Operating.
  8. Received cash interest on a note: Interest received (operating, as it's part of normal operations' cash inflow). Operating.
  9. Received cash dividends from investments: Dividends received (operating, as it's part of cash inflow from operations - related investments). Operating.
  10. Paid cash for rent: Payment for operating expense. Operating.

Answer:

Cash Flow Activity
1. Paid cash for a building. Investing
2. Cash paid to purchase investments. Investing
3. Received cash from long - term debt issuance. Financing
4. Paid long - term debt with cash. Financing
5. Received cash payments from customers. Operating
6. Issued common stock for cash. Financing
7. Paid cash for wages and salaries. Operating
8. Received cash interest on a note. Operating
9. Received cash dividends from investments. Operating
10. Paid cash for rent. Operating