Identifying activity categories—direct method
Consider the following transactions:
a. Collection of accounts receivable.
b. Issuance of note payable to borrow cash.
c. Depreciation.
d. Issuance of preferred stock for cash.
e. Payment of cash dividend.
f. Sale of land.
g. Acquisition of equipment by issuance of note payable.
h. Payment of note payable.
i. Purchase of treasury stock.
j. Issuance of common stock for cash.
k. Payment of account payable.
l. Acquisition of building by issuance of common stock.
m. Purchase of equipment.
n. Payment of wages to employees.
o. Collection of cash interest.
p. Sale of building
Requirement
1. Identify each of the transactions as a(n)
? Operating activity (O)
? Investing activity (I)
? Financing activity (F)
? Noncash investing and financing activity (NIF)
? Transaction that is not reported on the statement of cash flows (N)
For each cash flow, indicate whether the item increases (+) or decreases (–) cash. The direct method is used for cash flows from operating activities.