Question

Categorize these 5 activities:

1. Proceeds from sale of land.

2. Inventories increase (decrease)

3. Paid interest expense on outstanding bonds.

4. Increase (decrease) in long-term notes payable. (This is an amount owed to a Financial institution).

5. Issued common shares for cash.

To categorize each of the 5 activities, each activity needs to be classified. Each of the 5 activities must also be determined as to which corresponding financial statement section they can be found in. (Assume that the company's business model is not one that sells equipment or stationary)

The classification possibilities are:

i) Investing

ii) Financing

iii) Operating.

The corresponding financial statement section possibilities are:

a) Net income/(loss)

b) Current liabilities, long-term liabilities

c) Long-term liabilities, retained earnings

d) Long-term liabilities, share capital, dividends

e) Current assets, current liabilities

f) Current assets, long-term assets

g) Long-term assets

Answer 1

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Categorize these 5 activities:
1. Proceeds from sale of land.	i) Investing	Long-term assets
2. Inventories increase (decrease)	iii) Operating.	Current assets
3. Paid interest expense on outstanding bonds.	iii) Operating.	Net income/(loss)
4. Increase (decrease) in long-term notes payable. (This is an amount owed to a Financial institution).	ii) Financing	Long-term liabilities
5. Issued common shares for cash.	ii) Financing	Share capital