Question

In addition to recognizing what type of activity transactions are being described, it is important to recognize whether a transaction involves a source or use of cash, or whether it should be classified as an operating, investing, or financing cash flow. In the following table, determine whether each transaction should be classified as generating a cash inflow (source of funds) or outflow (use of cash), and whether it should be recorded as an operating, investing, or financing cash flow.

Transaction	Cash Inflow or Outflow	Operating, Investing, or Financing Cash Flow
James Co. incurred total operating expenses of $834,000 and total cash payments for expenses that equaled $781,000.
Jordan Co. paid preferred dividends of $36,000.
Marshall Co. issued new common stock for $317,000.
Armstrong Inc. purchased property for $71,000.

Answer 1

1)

James Co. incurred total operating expenses of $834,000 and total cash payments for expenses that equaled $781,000. - Cash outflow.

Jordan Co. paid preferred dividends of $36,000. - Cash outflow

Marshall Co. issued new common stock for $317,000. - Cash inflow

Armstrong Inc. purchased property for $71,000. - Cash outflow

2)

James Co. incurred total operating expenses of $834,000 and total cash payments for expenses that equaled $781,000. - Operating.

Jordan Co. paid preferred dividends of $36,000. - Financing

Marshall Co. issued new common stock for $317,000. - Financing

Armstrong Inc. purchased property for $71,000. - Investing