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Cornerstones of Financial Accounti...

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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

Cowell Company had the following business activities during 2019:

Chapter 11, Problem 52PSB, Classifying and Analyzing Business Activities Cowell Company had the following business activities

Cowell Company uses the indirect method to prepare its statement of cash flows.

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.

2. For each activity that is reported on the statement of cash flows, indicate whether each activity 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.

Explanation

For each transaction explanation is given below table:

Particular Activity Reason
a. Paid cash dividend to stockholders Financial activity Paid cash to the shareholder and shareholder belong to the share and share related to the financial activity.
b. Paid cash for inventory Operating activity Purchase of raw material and sold the finished goods is the normal activity and is to be considered in the operating activity.
c. Purchased equipment for cash Investing activity Purchase and sale of fixed assets which is long term purpose, is identified in the investing activity.
d. Paid interest on long-term debt tangible asset Financial activity Interest paid on the loan is also considered in the financial activity.
e. Acquired land in exchange for common stock Non-cash investing or financial activity In this activity there is no flow of cash because company purchase the land but company issued the common stock. Hence this activity is to be considered as the non-cash investing or financial activity.
f. Issued common stock for cash Financial activity Taking borrowing from another institution or persons which is related outside the firm...
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 choose:

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

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