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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Classifying and Analyzing Business Activities

CTT Inc. reported the following business activities during 2019:

Chapter 11, Problem 52PSA, Classifying and Analyzing Business Activities CTT Inc. reported the following business activities

Required:

1. Indicate whether each activity should be classified as a cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, or noncash investing and financing activity. Assume that CTT uses the indirect method.

2. For each activity that is reported on the statement of cash flows, indicate whether it produces a cash inflow, cash outflow, or no cash effect.

To determine

(a)

In budgetary bookkeeping, a cash flow statement, otherwise called statement of cash flows, is a fiscal report that demonstrates how changes in monetary record records and pay influence cash and cash reciprocals, and separates the examination to operating, investing, and financing activities.

To discuss:

Indicate whether each activity should be classified as a cash flow from operating activities, cash flow from investing activities, cash flow from financing activities, or noncash investing and financing activity. Assume that CTT uses the indirect method.

Explanation

All item explanation below:

Particular Reasons
a. Purchased property, plant, and equipment Purchase and sale of fixed assets which is long term purpose, is identified in the investing activity.
b. Purchased merchandise inventory for cash Purchase of raw material and sold the finished goods is the normal activity and is to be considered in the operating activity.
c. Recorded depreciation on property, plant, for cash and equipment As per the indirect method, depreciation is the non-cash item and added back in the operating activity.
d. Issued common stock for cash Taking borrowing from another institution or persons which is related outside the firm.
e. Purchased merchandise inventory on credit Inventory purchase on the credit basic no cash yet outflow.
f. Collected cash sales from customers Sale of finished goods is the normal business activity, hence related to operating activity.
g...
To determine

(b)

In budgetary bookkeeping, a cash flow statement, otherwise called statement of cash flows, is a fiscal report that demonstrates how changes in monetary record records and pay influence cash and cash reciprocals, and separates the examination to operating, investing, and financing activities.

To discuss:

For each activity that is reported on the statement of cash flows, indicate whether it produces a cash inflow, cash outflow, or no cash effect.

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