Which one of the following should be classified as a cash flow from an operating

Question

Which one of the following should be classified as a cash flow from an operating activity on the statement of cash flows? A. The payment of cash for the purchase of additional equipment needed for current production. B. An increase in cash resulting from the issuance of previously authorized common stock. C. A decrease in accounts payable during the year. D. The payment of a cash dividend from money arising from current operations Which one of the following should be classified as a cash flow from an operating activity on the statement of cash flows? A. The payment of cash for the purchase of additional equipment needed for current production. B. An increase in cash resulting from the issuance of previously authorized common stock. C. A decrease in accounts payable during the year. D. The payment of a cash dividend from money arising from current operations

Explanation / Answer

Answer:-The following should be classified as a cash flow an opreating activity on the statment of cash flows:-A decrease in accounts payable during the year (Part C).

Explanation:-

1:-The payment of cash for the purchase of additional equipment needed for current production:- Investing Activities

2:-An increase in cash resulting from the issuance of previously authorized common stock:- Financing Activities

3:-The payment of a cash dividend from money arising from current operations:- Financing Activities

4:-Cash Flows from Operating Activities:

   Net Income

Add:-

Non-Cash Expenses:

(Depreciation, Depletion & Amortization Expense)

Add:-

Non-Operating Losses:

(Loss on Sale of Non-Current Assets)

Less:-

Non-Operating Gains:

(Gain on Sale of Non-Current Assets)

Add:-

Decrease in Current Assets:

(Accounts Receivable, Prepaid Expenses, Inventory etc.)

Less:-

Increase in Current Assets

Add:-

Increase in Current Liabilities:

(Accounts Payable, Accrued Liabilities, Income Tax Payable etc.)

Less:-

Decrease in Current Liabilities

4:-Cash Flows from Operating Activities:

   Net Income

Add:-

Non-Cash Expenses:

(Depreciation, Depletion & Amortization Expense)

Add:-

Non-Operating Losses:

(Loss on Sale of Non-Current Assets)

Less:-

Non-Operating Gains:

(Gain on Sale of Non-Current Assets)

Add:-

Decrease in Current Assets:

(Accounts Receivable, Prepaid Expenses, Inventory etc.)

Less:-

Increase in Current Assets

Add:-

Increase in Current Liabilities:

(Accounts Payable, Accrued Liabilities, Income Tax Payable etc.)

Less:-

Decrease in Current Liabilities

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