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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

Classification of Cash Flows

Refer to the information for Peterson Inc. above.

Required:

Classify each change in the balance sheet account as a cash flow from operating activities, a cash flow from investing activities, a cash flow from financing activities, or a noncash investing and financing activity.

To determine

Introduction:

Balance sheet:

An announcement of assets, liabilities, and capital of a business or another association at a specific point in time, enumerating the parity of income and expenditure over the previous period.

Cash flow:

A cash flow statement normally breaks out an organization’s cash sources and uses for the period into three classifications: cash flow from operating activities, cash flow from investing activities, and cash flow from financing exercises.

To choose:

Classify each change in the balance sheet account as a cash flow from operating activities, a cash flow from investing activities, a cash flow from financing activities, or a non- cash investing and financing activity.

Explanation

There is difference in the balance sheet and cash flows then each item should be classified.

  1. Increase in long-term investment means purchase the assets and outflow the cash.
  2. Increase in account receivable means increase in credit sale and cash flow is considered as outflow.
  3. Increase in common stock means company issue the stock in public and cash inflow.
  4. Increase in long-term debt means company issue the debt in public and the loan amount is classified as inflow...

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