Question

Classify the following items as (1) operating, (2) investing, (3) financing, or (4) significant noncash investing and financing activities, using the direct method. (a) Cash payments to employees. (b) Redemption of bonds payable. (c) Sale of building at book value. (d) Cash payments to suppliers. (e) Exchange of equipment for furniture. (f) Issuance of preferred stock. (g) Cash received from customers. (h) Purchase of treasury stock. (i) Issuance of bonds for land. (j) Payment of dividends. (k) Purchase of equipment. (l) Cash payments for operating expenses.

Answer 1

Answer:

(a) Cash payments to employees

Cash-flow classification: Operating activities

(b) Redemption of bonds payable

Cash-flow classification: Financing activities

(c) Sale of building at book value

Cash-flow classification: Investing activities

(d) Cash payments to suppliers

Cash-flow classification: Operating activities

(e) Exchange of equipment for furniture

Cash-flow classification: Significant non-cash activities

(f) Issuance of preferred stock

Cash-flow classification: Financing activities

(g) Cash received from customers

Cash-flow classification: Operating activities

(h) Purchase of treasury stock

Cash-flow classification: Financing activities

(i) Issuance of bonds for land

Cash-flow classification: Significant non-cash activities

(j) Payment of dividends

Cash-flow classification: Financing activities

(k) Purchase of equipment

Cash-flow classification: Investing activities

(l) Cash payments for operating expenses

Cash-flow classification: Operating activities