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Classification of Cash Flows

Question 144

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Classification of cash flows
Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year. Use the following code: O = operating activities, I = investing activities, and F = financing activities.
Assume this company uses the direct method. If the event does not involve a cash flow that should be included in the statement of cash flows, use an X.

Premises:
Declared a dividend to be paid early next year.
Recorded depreciation expense for the current year.
Issued ordinary shares for cash; management plans to use this cash to invest in equity securities.
Collected interest due on note receivable described in f, above.
Used the cash received in d, above, to purchase equity securities.
Collected principal amount due on a note receivable.
Collected account receivable from a customer who made a large credit purchase in a prior period.
At year-end, paid rent in advance for the next six months.
Made an adjusting entry to accrue interest payable at year-end.
Sold a parcel of unused land at a loss.
Responses:
I = investing activities
F = financing activities.
O = operating activities
X = event does not involve a cash flow.

Correct Answer:

Declared a dividend to be paid early next year.
Recorded depreciation expense for the current year.
Issued ordinary shares for cash; management plans to use this cash to invest in equity securities.
Collected interest due on note receivable described in f, above.
Used the cash received in d, above, to purchase equity securities.
Collected principal amount due on a note receivable.
Collected account receivable from a customer who made a large credit purchase in a prior period.
At year-end, paid rent in advance for the next six months.
Made an adjusting entry to accrue interest payable at year-end.
Sold a parcel of unused land at a loss.
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