Exercise 1
Classify each of the following transactions as an operating activity, an investing activity or a financing activity cash flow, or a non cash transaction - Indicate also its effect on the Income statement (increase or decrease the profit)
- Provide services for cash
- Purchase marketable securities for cash
- Paid cash for rent
- Received interest on note receivable
- Paid cash for salaries
- Received advance payment for services
- Paid a cash dividend
- Provide services on account
- Bought land with cash
- Collected cash from receivables
- Issued common stock for cash
- Repaid principal and interest on a note payable
- Declared a stock split
- Purchased inventory with cash
- Recorded depreciation of fixed asset
- Paid insurance with cash
- Issued a note payable in exchange for equipment
Exercise 2
Prepare the statement of Cash flows for 2007, using the indirect method, with the financial statements and additional information as below:
Additional information
- Purchased land for $ 112,000
- Purchased new equipment for $ 100,000
- Sold old equipment that costs $ 132,000 with accumulated depreciation of $ 112,000 for 20,000 cash
- Issued common stock for $ 50,000
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