Cash flows from operating activities and net income

Assignment Help Financial Accounting

Reference no: EM1314374

Classification of cash flow activities.

Any given transaction may affect a statement of cash flows (using the indirect method) in one or more of the following ways:

Cash flows from operating activities

a. Net income will be increased or adjusted upward.

b. Net income will be decreased or adjusted downward.

Cash flows from investing activities

c. Increase as a result of cash inflows.

d. Decrease as a result of cash outflows.

Cash flows from financing activities

e. Increase as a result of cash inflows.

f. Decrease as a result of cash outflows.

The statement of cash flows is not affected

Not required to be reported in the body of the statement.

Instructions

For each transaction listed below, list the letter or letters from above that describe(s) the effect of the transaction on a statement of cash flows for the year ending December 31, 2008. (Ignore any income tax effects.)

1. Preferred stock with a carrying value of $44,000 was redeemed for $50,000 on January 1, 2008.

2. Uncollectible accounts receivable in the amount of $3,000 were written off against the allowance for doubtful accounts balance of $12,200 on December 31, 2008.

3. Machinery w2hich originally cost $3,000 and has a book value of $1,800 is sold for $1,400 on December 31, 2008.

4. Land is acquired through the issuance of bonds payable on July 1, 2008.

5. 1,000 shares of stock, stated value $10 per share, are issued for $25 per share in 2008.

6. An appropriation of retained earnings for treasury stock in the amount of $35,000 is established in 2008.

7. A cash dividend of $8,000 is paid on December 31, 2008.

8. The portfolio of long-term investments (available-for-sale) is at an aggregate market value higher than aggregate cost at December 31, 2008

Reference no: EM1314374

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