Question

State the section(s) of the statement of cash flows (operating activities, investing activities, or financing activities), the dollar amount, and whether the item would be added or deducted for each of the following transactions:

a)    Received $100,000 from the sale of land costing $25,000.

b)    Purchased investments for $50,000.

c)    Declared $30,000 cash dividends on stock. $5,000 dividends were payable at the beginning of the year, and $5,750 were payable at the end of the year.

d)    Acquired equipment for $60,000 cash.

e)    Declared and issued 100 shares of $20 par common stock as a stock dividend, when the market price of the stock was $32 a share.

f)     Recognized by an adjusting entry depreciation for the year, $30,000.

g)    Issued 10,000 shares of $20 par common stock for $30 a share, receiving cash.

h)    Issued $500,000 of 20-year, 10% bonds payable at 99.

i)      Borrowed $25,000 from Busby National Bank, issuing a 5-year, 8% note for that amount.

Answer 1

--Requirement asked

Transaction	Section of Statement of Cash Flows	Amount	Added or Deducted
a	Investing	$100,000	Added
b	Investing	$50,000	Deducted
c	Financing ($5000 + 30000 - 5750)	$29,250	Deducted
d	Investing	$60,000	Deducted
e	Not applicable as it’s a non cash activities
f	Operating (in case of Indirect method)	$30,000	Added
g	Financing [10000 x 30)	$300,000	Added
h	Financing (500000 x 99/100)	$495,000	Added
i	Financing	$25,000	Added