Question

Classifying items on the indirect statement of cash flows

Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to consider in preparing the statement:

  • Increase in accounts payable
  • Payment of dividends
  • The decrease in accrued liabilities
  • Issuance of common stock
  • Gain on sale of the building
  • Loss on sale of land
  • Depreciation expense
  • Increase in merchandise inventory
  • The decrease in accounts receivable
  • Purchase of equipment

Identify each item as a(n):

  • Operating activity—in addition to net income (O+) or subtraction from net income (O–)
  • Investing activity—cash inflow (I+) or cash outflow (I–)
  • Financing activity—cash inflow (F+) or cash outflow (F–)
  • Activity that is not used to prepare the indirect statement of cash flows (N)
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