Indicate where each item would appear on a statement of cash flows using the indirect method

Operating

Activities

Investing activities

Financing

Activities

Non-cash investing and financing activities

Not reported on the statement

or in notes

Explanation

a

Retired long-term notes payable by issuing common stock

X

Once the organization has received the funds from the lender, the principal amount from a long-term loan, or note payable, often shows in the financing activities part of the cash flow statement.

b

Paid cash toward accounts payable

X

Accounts Payable will be charged, and Cash will be credited when an account payable is paid. Subsequently, it reflects the recorded but unpaid vendor bills in Accounts Payable's credit balance. Accounts payable falls under the category of operating activities.

c

Sold inventory for cash

X

Since the sale of items affects net income through expenses, it would seem to constitute an operational activity (merchandise costs ultimately flow through the cost of goods sold on the income statement).

d

Paid cash dividend that was declared in a prior period

X

Dividend payments are often seen as financing activities since they are made to the investors (shareholders), who are essentially co-financing the business.

e

Accepted six-month note receivable in exchange for plant assets

X

This transaction is a non-cash activity of the business because plant assets are exchanged against the note receivable.

f

Recorded depreciation expense

X

Depreciation is added back when computing the indirect method of the cash flow statement since it is subtracted from the net profit calculation and is not a cash item. Depreciation is, in essence, an accounting metric that is subtracted from revenue or net sales to determine the company's cash flow.

g

Paid cash to acquire treasury stock

X

In the statement of cash flows, the acquisition of Treasury Stock is categorized as a financing activity. The acquisition of other firms' equity securities as an investment shows a cash outflow from investing operations.

h

Collected cash from sales

X

The total of your cash receipts for the accounting period is your cash collection. Depending on the business operations one engages in, these cash receipts are divided into several categories in a cash receipt statement of cash flow.

i

Borrowed cash from the bank by signing a nine-month note payable

X

Once the organization gets the funds from the lender, the principal amount from a long-term loan, or note payable, often shows in the financing activities part of the cash flow statement.

j

Paid cash to purchase a patent

X

Report the patent acquisition by including an outflow for the entire amount paid for the patent on the statement of cash flows. Information from the general ledger is adequate to report this purchase. The operational portion covers patent-related amortization.

Particular

Amount $

Amount $

Computer service revenue

$25,307

Net sales

18,693

Total revenue

44,000

Cost of goods sold

$14,052

Depreciation expenses – Office equipment

400

Depreciation expenses – Computer equipment

1,250

Wages expenses

3,250

Insurance expenses

555

Rent expenses

2,475

Computer supplies expenses

1,305

Advertising expenses

600

Mileage expenses

320

Repair expenses – computer

960

Total expenses

25,167

Net income

$18,833

March 31, 2018

Dec 31, 2017

Cash

$68,057

$48,372

Accounts receivables

22,867

5,668

Inventory

704

0

Computer supplies

2,005

580

Prepaid insurance

1,110

1,665

Prepaid rent

825

825

Total current assets

95,568

95,568

Office equipment

8,000

8,000

Accumulated depreciation – office equipment

(800)

(400)

Computer equipment

20,000

20,000

Accumulated depreciation – computer equipment

(2,500)

(1,250)

Total assets

$120,268

$120,268

Liability and equity

Account payable

$0

$1,100

Wages payable

875

500

Unearned computer service revenue

0

1,500

Total current liabilities

875

3,100

Equity

Common stock

98,000

73,000

Retained earnings

21,393

7,360

Total liabilities and equity

$120,268

$83,460

Net income (loss)

€ (822)

Cash from issuances of shares

€ 2,961

Depreciation, amortization, and impairment

2,530

Cash paid for other financing activities

(1,891)

Losses on disposals and other

42

Cash from disposal of plant assets & intangibles

206

Net decrease in current operating assets & other

2,314

Cash paid for plant assets, intangibles & other

(2,542)

Cash paid for dividends

(58)

Cash and cash equivalents, December 31, 2013

8,162