Question

Which of the following would be create a cash inflow?

purchase of equipment

repurchase common shares

issue common shares

cash dividends paid

Answer 1

Purchase of equipment means equipment balance increases and is debited while cash balance decreased and is credited.

Repurchase common shares is journalised as:

Treasury stock a/c...Dr

To cash

Hence cash decreases in this transaction

For cash dividends paid;dividend payments decrease cash and cash balance is credited.

For issuing common shares;journal is:

Cash a/c..Dr

To common stock(if issued at par)

Hence cash balance increases and there is an inflow of cash when common shares are issued.

Hence the correct option is:

issue common shares