Listed Below Are the Reporting Classifications for a Statement of Cash

question 49

Essay

Listed below are the reporting classifications for a statement of cash flows using the direct method for reporting operating cash flows. Indicate the reporting classification that would apply to each of the five transactions described below by placing the number of the reporting classification in the space provided by each transaction. $$\begin{array} { | l | l | l | } \hline \text { CLASSIFICATION } & \text { TRANSACTIONS } & \text { NUMIBER } \\\hline \text { 1. Investing cash outflow } & \begin{array} { l } \text { Acquisition of equipment by issuing } \\\text { ponds payable. }\end{array} & -\\\hline \text { 2.Noncash financing and } & \text { Repayment of long-term debt by issuing } & \\\text { investing activity } & \text { preferred stock. } & -\\\hline \text { 3. Financing cash outflow } & \text { Interest received on trading securities. } & -\\\hline \text { 4. Investing cash inflow } & \text { Cash sale of a patent at book value. } & -\\\hline & \text { Loan of cash to a supplier in exchange } & \\\text { 5. Operating cash inflow } & \text { for a six-month note receivable. } & -\\\hline\end{array}$$

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Definitions:

Fixed Costs

Constant expenditures that do not change with the volume of production or sales, such as rent or salaries.

Contribution Margin Ratio

A measure expressing how a product's selling price exceeds variable costs, shown as a percentage of the sales price.

Fixed Expenses

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much contributes to covering fixed costs and generating profit.