Exercise 12-2 An analysis of comparative balance sheets, the current year\'s inc

Question

Exercise 12-2 An analysis of comparative balance sheets, the current year's income statement, and the general ledger accounts of Judd Corp. uncovered the following items. Assume all items involve cash unless there is information to the contrary. Indicate how each item should be classified in the statement of cash flows using these four major classifications: operating activity (indirect method), investing activity, financing activity, and significant noncash investing and financing activity (a) Payment of interest on notes payable (b) Exchange of land for patent. (c) Sale of building at book value. (d) (e) (f) Payment of dividends. Depreciation. Conversion of bonds into common stock. (g) Receipt of interest on notes receivable. (h) Issuance of capital stock.

Explanation / Answer

a) Payment of interest on notes payable. - Operating activity

(b) Exchange of land for patent. - Noncash investing and financing activity

(c) Sale of building at book value. - Investing activity

(d) Payment of dividends. - Financing activity

(e) Depreciation. - Operating activity

(f) Receipt of dividends on investment in stock. - Operating activity

(g) Receipt of interest on notes receivable. - Operating activity

(h) Issuance of common stock. - Financing activity

(i) Amortization of patent. - Operating activity

(j) Issuance of bonds for land. - Noncash investing and financing activity

(k) Purchase of land. - Investing activity

(l) Conversion of bonds into common stock. - Noncash investing and financing activity

(m) Loss on disposal of plant assets. - Operating activity

(n) Retirement of bonds. - Financing activity

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