Classification of Cash Flows

question 167

Essay

Classification of cash flows
Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year. Use the following code: O = operating activities, I = investing activities, and F = financing activities.
Assume use of the direct method. If the event does not involve a cash flow that should be included in the statement of cash flows, use an X.
____ (a) Paid an account payable for inventory purchased in a prior accounting period.
____ (b) On 28 December made a large credit sale; terms, 2/10, n/30.
____ (c) Received a dividend from an investment in IBM ordinary shares.
____ (d) Paid a dividend to shareholders.
____ (e) Paid the interest on a note payable to First Bank.
____ (f) Paid the principal amount due on the note payable to First Bank.
____ (g) Transferred cash from a checking account into a money market fund.
____ (h) Made an adjusting entry to record accrued wages payable at the end of the period.
____ (i) Recorded depreciation expense for the current year.
____ (j) Purchased property, plant, and equipment for cash.

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Definitions:

Initial Franchise Fee

A one-time charge that a new franchisee pays to the franchiser for the rights to operate a franchise, covering initial training, support, and access to the business model.

Material Services

Significant or essential services provided that contribute directly to the output of the production process or operational efficiency.

Franchisor

An entity that grants the right to use a brand, product, or operational model to an individual or entity (franchisee), typically for a fee.

Bundled Sales

The practice of selling multiple products or services together as a single combined offering, often at a discounted rate.