Question

Question No. 2                                 (LO5)                                                 

The major classifications of activities reported in the statement of cash flows are Operating (O), Investing (I), and Financing (F). Classify each of the transactions listed below as:

1. Operating activity—add to net income.
2. Operating activity—deduct from net income.
3. Investing activity.
4. Financing activity.
5. Reported as significant non-cash activity in the notes to the financial statements.

The transactions are as follows.

Transactions	Activity (O, I, F)	ADD or LESS + or -
Issuance of ordinary shares.
Purchase of land and building,
Redemption of bonds,
Sale of equipment
Depreciation of machinery.
Issuance of bonds for plant assets,
Payment of cash dividends,
Exchange of furniture for office equipment.
Purchase of treasury shares.
Loss on sale of equipment.
Increase in accounts receivables during the year,
Decrease in accounts payable during the year.

Answer 1