Classifying items on the indirect statement of cash flows The statement of cash flows categorizes like transactions for optimal reporting. Identify each item as a(n): Operating activity—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–) Non-cash investing and financing activity (NIF) Activity that is not used to prepare the indirect statement of cash flows (N) The indirect method is used to report cash flows from operating activities. Loss on sale of land. Acquisition of equipment by the issuance of note payable. Payment of long-term debt. Acquisition of building by the issuance of common stock. Increase in Salaries Payable. The decrease in Merchandise Inventory. Increase in Prepaid Expenses. The decrease in Accrued Liabilities. Cash sale of land. Issuance of long-term note payable to borrow cash. Depreciation Expense. Purchase of treasury stock. Issuance of common stock. Increase in Accounts Payable. Net income. Payment of cash dividend.

Question

Classifying items on the indirect statement of cash flows

The statement of cash flows categorizes like transactions for optimal reporting. Identify each item as a(n):

  • Operating activity—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–)
  • Non-cash investing and financing activity (NIF)
  • Activity that is not used to prepare the indirect statement of cash flows (N)

The indirect method is used to report cash flows from operating activities.

  • Loss on sale of land.
  • Acquisition of equipment by the issuance of note payable.
  • Payment of long-term debt.
  • Acquisition of building by the issuance of common stock.
  • Increase in Salaries Payable.
  • The decrease in Merchandise Inventory.
  • Increase in Prepaid Expenses.
  • The decrease in Accrued Liabilities.
  • Cash sale of land.
  • Issuance of long-term note payable to borrow cash.
  • Depreciation Expense.
  • Purchase of treasury stock.
  • Issuance of common stock.
  • Increase in Accounts Payable.
  • Net income.
  • Payment of cash dividend.

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