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For Each of the Following Items, Select by Using the Appropriate

Question 234

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For each of the following items, select by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the .

Premises:

Responses:

Conversion of bonds payable into common stock.

Is not shown

Depreciation expense.

Cash inflow—investing activity

Decrease in accounts receivable during a period.

Cash outflow—financing activity

Decrease in accounts payable during a period.

Deducted in determining cash payments to suppliers

Decrease in inventory during a period.

Cash outflow—investing activity

Declaration and payment of a cash dividend.

Added in determining cash receipts from customers

Loss on sale of a plant asset.

Cash inflow—financing activity

Sale of equipment for cash at book value.

Significant noncash investing and financing activity

Purchase of land for cash.

Added in determining cash payments to suppliers

Issuance of preferred stock for cash.

Deducted in determining cash receipts from customers

Premises:

Conversion of bonds payable into common stock.

Depreciation expense.

Decrease in accounts receivable during a period.

Decrease in accounts payable during a period.

Decrease in inventory during a period.

Declaration and payment of a cash dividend.

Loss on sale of a plant asset.

Sale of equipment for cash at book value.

Purchase of land for cash.

Issuance of preferred stock for cash.

Responses:

Is not shown

Cash inflow—investing activity

Cash outflow—financing activity

Deducted in determining cash payments to suppliers

Cash outflow—investing activity

Added in determining cash receipts from customers

Cash inflow—financing activity

Significant noncash investing and financing activity

Added in determining cash payments to suppliers

Deducted in determining cash receipts from customers

Correct Answer:

Premises:

Responses:

Conversion of bonds payable into common stock.

Depreciation expense.

Decrease in accounts receivable during a period.

Decrease in accounts payable during a period.

Decrease in inventory during a period.

Declaration and payment of a cash dividend.

Loss on sale of a plant asset.

Sale of equipment for cash at book value.

Purchase of land for cash.

Issuance of preferred stock for cash.

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