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Question 1

The statement of cash flows categorizes like transactions for optimal reporting.

Identify each item as a(n):

  • Operating activity—add to net income (O+) or subtraction from net inc. (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 (N)

Cash Flow ItemsClassification
Acquiring equipment by issuing Note payable
Increase in Accounts Payable
Purchase of treasury stock
Net Income
Cash sale of land
Payment of cash dividend
Decrease in Accrued Liabilities
Payment of long-term debt
Decrease in Merchandise Inventory
Acquiring building for common stock
Increase in Prepaid Expense
Issuing a long-term note payable to borrow cash
Increase in Salaries Payable
Depreciation expense
Loss on sale of land
Issuance of common stock