Each of the items below must be considered in preparing a statement of cash flows for Baskerville Co. for the year ended December 31, 2020. For each item, state how it should be shown in the statement of cash flows for 2020 if the indirect method is used. (a) Issued bonds for $200,000 cash. (b) Purchased equipment for $150,000 cash. (c) Sold land costing $20,000 for $20,000 cash. (d) Declared and paid a $50,000 cash dividend

Question

Business

Lennon Chen

11 May, 02:48

Each of the items below must be considered in preparing a statement of cash flows for Baskerville Co. for the year ended December 31, 2020. For each item, state how it should be shown in the statement of cash flows for 2020 if the indirect method is used. (a) Issued bonds for $200,000 cash. (b) Purchased equipment for $150,000 cash. (c) Sold land costing $20,000 for $20,000 cash. (d) Declared and paid a $50,000 cash dividend

+3

Answers (1)

Know the Answer?

Eva Morton · Answer 1

a. cash inflow under the financing activity

b. cash outflow under the investing activity

c. cash inflow under the investing activity

d. cash outflow under the financing activity

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.

So, the categorization are shown below:

a) Issued bonds for $200,000 cash - cash inflow under the financing activity

(b) Purchased equipment for $150,000 cash - cash outflow under the investing activity

(c) Sold land costing $20,000 for $20,000 cash - cash inflow under the investing activity

(d) Declared and paid a $50,000 cash dividend - cash outflow under the financing activity