Question

State the section(s) of the statement of cash flows prepared by the indirect method (operating activities, investing activities, financing activities, or not reported) and the amount that would be reported for each of the following transactions:

Note: Only consider the cash component of each transaction. Use the minus sign to indicate amounts that are cash out flows, cash payments, decreases in cash, or any negative adjustments.

If your answer is not reported in an amount box does not require an entry, leave it blank or enter "0".

a.	Received $120,000 from the sale of land costing $70,000.	Investing activities	$
		Operating activities	$
b.	Purchased investments for $75,000.	Investing activities	$
c.	Declared $35,000 cash dividends on stock. $5,000 dividends were payable at the beginning of the year, and $6,000 were payable at the end

Answer 1

Solution:

a.	Received $120,000 from the sale of land costing $70,000	Investing activity	$120,000
		Operating activity	50,000
b.	Purchased investments for $75,000	Investing activity	- 75,000
c.	Declared $35,000 cash dividends on stock, $5,000 dividends were payable at the beginning of the year and $6,000 were payable at the end	Financing activity	- 34000

Explanation:

Received cash for sale of land = $120,000 is an investing activity and it is an cash inflow

50,000 (120,000 - 70000) is deducted from the net income in the statement of operating activity.

Purchased investments for $75,000 it is an investing activity and it is an cash outflow.

Declared cash dividends 34,000 (35000 + 5000 - 6000) is a financing activity and it is an cash outflow.