E12-1A. Classification of Cash Flows For each of the items below, indicate wheth

Question

E12-1A. Classification of Cash Flows For each of the items below, indicate whether the cash flow item relates to an operating activity, an investing activity, or a financing activity: a. Cash receipts from customers for services rendered b. Sale of long-term investments for cash c. Acquisition of plant assets for cash d. Payment of income taxes L01 Chapter 12 Statement of Cash Flows 60 e. Bonds payable issued for cash f Payment of cash dividends declared in previous year g. Purchase of short-term investments (not cash equivalents) for cash 8

Explanation / Answer

Operating activities are the revenue generating activities of an enterprise. It comes from those transctions which result in net profit or loss.

Investing activities are those which involve sale or purchase of long term assets not held for resale.

Financing activities are thoise which causes change in owners capital of the firm.

Thus,

a) Operating activity

b) Investing activity

c) Investing activity

d) Operating activity

e) Financing activity

f) Financing Activity

g) Investing activity

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