Exhibit 12-2
Carr Company has the following cash flows to account for:
(1)Cash receipts for the sale of common stock.
(2)Cash payments for the purchases of merchandise.
(3)Cash receipts from the collection of accounts receivable.
(4)Cash receipts from the collection of principal on loans made to others.
(5)Cash payments to shareholders for dividends.
(6)Cash payments for the purchase of machinery.
-Refer to Exhibit 12-2.Which of these items would appear in the operating activities

Question

Quizplus · Accepted Answer

Operating activities include cash transactions related to the day-to-day operations of a business. Items 2 and 3 relate to the sale and collection of merchandise, respectively, which are typical operating activities. Item 4 may also be an operating activity if the company is in the business of lending money. Item 1 and 5 are related to financing activities, and item 6 is related to investing activities. Therefore, the best answer is C, which includes only items 2 and 3.

Exhibit 12-2 Carr Company Has the Following Cash Flows to Account For