Answer:
a. Operating activities (indirect method)
1. Pays a $20,000 account payable
2. Collects a $15,000 account receivable
3. Pays $75,000 to suppliers for inventory.
b. Investing activities
Purchases equipment for $
Loans $50,000 to a customer, accepting a note receivable.
c. Financing activities
Issues $20 million in bonds
Declares and pays a cash dividend of $100,000
d. A separate noncash activities note
Exchanges land for a new patent. Both are valued at $300,000.
Explanation:
The categorisation and their effects are explained as follows:
a. Operating activities (indirect method)
1. Pays a $20,000 account payable: This a cash outflow and its effect is a reduction in cash flow from operating activities.
2. Collects a $15,000 account receivable: This a cash inflow and its effect is an increase cash flow from operating activities.
3. Pays $75,000 to suppliers for inventory: This a cash outflow and its effect is a reduction in cash flow from operating activities.
b. Investing activities
1. Purchases equipment for $: This a cash outflow and its effect is a reduction in cash flow from investing activities.
2. Loans $50,000 to a customer, accepting a note receivable: This a cash outflow and its effect is a reduction in cash flow from investing activities.
c. Financing activities
1. Issues $20 million in bonds: This a cash inflow and its effect is an increase in cash flow from financing activities.
2. Declares and pays a cash dividend of $100,000: This a cash outflow and its effect is a reduction in cash flow from financing activities.
d. A separate noncash activities note
1. Exchanges land for a new patent. Both are valued at $300,000: This is a noncash transaction that neitheir leads to the outlow nor inflow of cash.
