Exam accounting

I’m trying to study for my Accounting course and I need some help to understand this question.

There are four parts to the Statement of Cash Flows (or Cash Flow Statement):

1. Operating Activities
2. Investing Activities
3. Financing Activities

For each of the following items, indicate which part will be affected.

Depreciation expense

Proceeds from the sale of equipment used in the business

The loss on the sales of equipment in question #2

Declaration and payment of dividends on company’s stock

Gain on the sale of automobile formerly used in the business

The proceeds from the sale of the automobile it item #5

An increase in the balance in a retailer’s merchandise inventory

An increase in the balance in accounts payable

Retirement of long-term bonds payable

Purchase of treasury stock (company’s own stock)

The purchase of a new delivery truck to be used in the business

A decrease in the balance of accounts receivable

An increase in bonds payable (long-term liability)

A decrease in the current asset account prepaid insurance

A decrease in the current liability income taxes payable

The proceeds from issuing additional common stock

The amortization of the cost of an intangible asset

The exchange/conversion of long-term bonds into common stock

For this question, indicate whether each action will have a positive or negative effect on cash. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement.





Exam accounting

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