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For Each of the Following Items, Indicate by Using the Appropriate

Question 215

Matching

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.

Premises:

Responses:

Decrease in accounts payable during a period

Added to net income

Declaration and payment of a cash dividend.

Deducted from net income

Loss on sale of land.

Cash outflow—investing activity

Decrease in accounts receivable during a period.

Cash inflow—investing activity

Redemption of bonds for cash.

Cash outflow—financing activity

Proceeds from sale of equipment at book value.

Cash inflow—financing activity

Issuance of common stock for cash.

Significant noncash investing and financing activity

Purchase of a building for cash.

Acquisition of land in exchange for common stock.

Increase in merchandise inventory during a period.

Premises:

Decrease in accounts payable during a period

Declaration and payment of a cash dividend.

Loss on sale of land.

Decrease in accounts receivable during a period.

Redemption of bonds for cash.

Proceeds from sale of equipment at book value.

Issuance of common stock for cash.

Purchase of a building for cash.

Acquisition of land in exchange for common stock.

Increase in merchandise inventory during a period.

Responses:

Added to net income

Deducted from net income

Cash outflow—investing activity

Cash inflow—investing activity

Cash outflow—financing activity

Cash inflow—financing activity

Significant noncash investing and financing activity

Correct Answer:

Premises:

Responses:

Decrease in accounts payable during a period

Declaration and payment of a cash dividend.

Loss on sale of land.

Decrease in accounts receivable during a period.

Redemption of bonds for cash.

Proceeds from sale of equipment at book value.

Issuance of common stock for cash.

Purchase of a building for cash.

Acquisition of land in exchange for common stock.

Increase in merchandise inventory during a period.

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