Exercise 7 Aqua Pools Inc. had the following activity in its most recent year of

Question

Exercise 7     Aqua Pools Inc. had the following activity in its most recent year

of operations.

(a) Purchase of delivery truck.                              (g) Purchase of treasury stock.

(b) Issuance of bonds payable.                              (h) Gain on sale of equipment.

(c) Sale of investments for no gain or loss.            (i) Goodwill impairment.

(d) Amortization of intangible assets.                     (j) Payment of dividends.

(e) Conversion of bonds into stock.                       (k) Sale of treasury stock.

(f) Exchange of building for land.                          (l) Decrease in interest payable on note payable.

Instructions

Classify the items as (1) operating—add to net income; (2) operating—deduct from net income;

(3) investing; (4) financing; or (5) significant noncash investing and financing activities. Use the indirect method.

Explanation / Answer

Operating - Add to net Income Gain on sale of equipment Operating - deduct from net Income Amortization of intangible assets Investing Purchase of delivery truck Sale of investments for no gain or loss Purchase of treasury stock Sale of treasury stock Financing Issuance of bonds payable Payment of dividends Decrease in interest payable on note payable Significant non cash investing activities Exchange of building for land Goodwill impairment Significant non cash Financing activities Conversion of bonds into stock

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