exercise 4-12 (static) statement of cash flows; classifications lo4-8\nthe statement of cash flows…

exercise 4-12 (static) statement of cash flows; classifications lo4-8\nthe statement of cash flows classifies all cash inflows and outflows into one of the three categories: operating activities, investing activities, financing activities. in addition, certain transactions that do not involve cash are reported in the statement as noncash investing and financing activities.\nrequired:\nfor each of the following transactions, select the appropriate classification category.\n1. purchase of equipment for cash.\n2. payment of employee salaries.\n3. collection of cash from customers.\n4. cash proceeds from notes payable.\n5. purchase of common stock of another corporation for cash.\n6. issuance of common stock for cash.\n7. sale of equipment for cash.\n8. payment of interest on notes payable.\n9. issuance of bonds payable in exchange for land and building.\n10. payment of cash dividends to shareholders.\n11. payment of principal on notes payable.

exercise 4-12 (static) statement of cash flows; classifications lo4-8\nthe statement of cash flows classifies all cash inflows and outflows into one of the three categories: operating activities, investing activities, financing activities. in addition, certain transactions that do not involve cash are reported in the statement as noncash investing and financing activities.\nrequired:\nfor each of the following transactions, select the appropriate classification category.\n1. purchase of equipment for cash.\n2. payment of employee salaries.\n3. collection of cash from customers.\n4. cash proceeds from notes payable.\n5. purchase of common stock of another corporation for cash.\n6. issuance of common stock for cash.\n7. sale of equipment for cash.\n8. payment of interest on notes payable.\n9. issuance of bonds payable in exchange for land and building.\n10. payment of cash dividends to shareholders.\n11. payment of principal on notes payable.

Answer

Brief Explanations:

  1. Purchasing equipment for cash is an investment in long - term assets, so it's an investing activity.
  2. Paying employee salaries is related to day - to - day business operations, thus an operating activity.
  3. Collecting cash from customers is a core operating activity as it's related to the main revenue - generating process.
  4. Cash proceeds from notes payable are related to borrowing funds, which is a financing activity.
  5. Buying common stock of another corporation for cash is an investment, so it's an investing activity.
  6. Issuing common stock for cash is raising capital, a financing activity.
  7. Selling equipment for cash involves long - term asset disposal, an investing activity.
  8. Paying interest on notes payable is related to the cost of borrowing, a financing activity.
  9. Issuing bonds payable in exchange for land and building is a non - cash investing and financing activity as no cash is involved.
  10. Paying cash dividends to shareholders is a distribution of profits to owners, a financing activity.
  11. Paying principal on notes payable is related to debt repayment, a financing activity.

Answer:

  1. Investing activities
  2. Operating activities
  3. Operating activities
  4. Financing activities
  5. Investing activities
  6. Financing activities
  7. Investing activities
  8. Financing activities
  9. Non - cash investing and financing activities
  10. Financing activities
  11. Financing activities