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26 July, 14:02

Determine proper classification (LO11-1) Wi-Fi, Inc., has the following selected transactions during the year. Required: Select the section of the statement of cash flows in which each of these items would be reported: operating activities (indirect method), investing activities, financing activities, or a separate noncash activities note Transactions Activities 1. Issues $20 million in bonds 2. Purchases equipment for $ 3. Pays a $20,000 account payable 4. Collects a $15,000 account receivable 5. Exchanges land for a new patent. Both are valued at $300,000. 6. Declares and pays a cash dividend of $100,000 7. Loans $50,000 to a customer, accepting a note receivable. 8. Pays $75,000 to suppliers for inventory. $80,000

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  1. 26 July, 15:33
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    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.
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