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25 June, 10:07

Each of the items below must be considered in preparing a statement of cash flows for Alpha-Omega Co. for the year ended December 31, 2014. For each item, state how it should be shown in the statement of cash flows for 2014. a. Issued bonds for $150,000 cash. b. Purchased equipment for $200,000 cash. c. Sold land costing $50,000 for $50,000 cash. d. Declared and paid a $20,000 cash dividend.

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  1. 25 June, 10:58
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    Answer: a) Financing Activity b) Investing Activity c) Investing Activity d) Financing Activity.

    Explanation:

    In the Cash Flow Statement there are 3 types of Activities, namely:

    1) Operating Activity: This is for revenue and expenses that are accounted for calculation of Net Income.

    2) Investing Activity: This includes the purchase and sale of assets: property, plant and equipment.

    3) Financing Activity: This includes cash inflows from issuance of bonds, stocks and it also includes cash outflow from paying dividends to stockholders.
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