Q16E - Horngren'S Financial And Managerial Accounting

Question

Classifying cash flow items Consider the following transactions:

1. Purchased equipment for \(130,000 cash.
2. Issued \)14 par preferred stock for cash. 
3. Cash received from sales to customers of \(35,000. 
4. Cash paid to vendors, \)17,000. 
5. Sold building for \(19,000 gain for cash. 
6. Purchased treasury stock for \)28,000. 
7. Retired a notes payable with 1,250 shares of the company’s common stock. 

Identify the category of the statement of cash flows in which each transaction would be reported.

Step-by-Step Solution

Answer

1. Investing
2. Financing
3. Operating
4. Operating
5. Investing
6. Investing
7. Non-cash

Step-by-Step Solution Step 1: Cash flow from operating activities

Cash Flow From Operating Activities	Amount($)
Cash received from sales to customers of	35,000
Cash paid to vendors	(17,000)
Cash flow provided by operating activities	18,000

Step 2: Cash flow from investing activities

Cash Flow From Investing Activities	Amount($)
Purchased equipment for $130,000 cash.	(35,000)
Sold building for $19,000 gain for cash.	19,000
Purchased treasury stock	(28,000).
Cash used by investing activities	44,000

Step 3: Cash flow from financing activities

Cash Flow From Financing Activities	Amount($)
Issued $14 par preferred stock for cash.	14
Net cash provided by financing activities	14