Listed Below Are Reporting Classifications for a Statement of Cash

question 186

Essay

Listed below are reporting classifications for a statement of cash flows using the indirect 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. $$\begin{array} {| l | l | l | } \hline \text { CLASSIFICATION } & \text { TRANSACTIONS } & \text { NUMBER } \\\hline \text { 1. Operating activity, no adjustment to net } & \begin{array} { l } \text { Increase in inventory } \\\text { income }\end{array} & -\\\hline \text { 2. Operating activity, negative adjustment to } & & \\ \text { net income } & \text { Payment of cash dividends. } & -\\\hline \text { 3. Financing cash outflow } & \text { Cash sales. } & -\\\hline \text { 4. Investing cash inflow } & \begin{array} { l } \text { Prepayment of an insurance } \\\text { premium for six months. }\end{array} & -\\\hline \begin{array}{l}\text { 5. Operating activity, positive adjustment to }\\\text { net income }\end{array} & \begin{array} { l } \text { Cash proceeds from sale of } \\\text { equipment. }\end{array} & -\\\hline\end{array}$$

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Definitions:

Marginal Product

The additional output generated by employing one more unit of a specific factor of production, keeping other factors constant.

Perfectly Competitive

A market structure where there are many sellers and buyers, products are homogeneous, and there is free entry and exit, leading to efficient outcomes and zero economic profits in the long run.

Corn Farmer

An individual or entity engaged in the cultivation of corn as a crop for various uses, such as food, feed, and biofuel.

Marginal Cost

The cost of producing one additional unit of a product, a key concept in economic theory that helps firms optimize production and pricing strategies.