Solved

Direct Method for Each of the Following Items, Indicate by Using the Using

Question 67

Matching

Direct Method
For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the cash flow statement, using the direct method. The same letter may be used more than once.

Premises:

Responses:

Purchase of land for cash

Deducted in determining cash payments to suppliers

Decrease in merchandise inventory during a period

Cash outflow-investing activity

Conversion of bonds into common shares

Cash inflow-investing activity

Declaration and payment of a cash dividend

Is not shown

Decrease in accounts payable during a period

Deducted in determining cash receipts from customers

Issue of preferred shares for cash

Significant noncash investing and financing activity

Loss on sale of land

Added in determining cash payments to suppliers

Depreciation expense

Cash inflow-financing activity

Decrease in accounts receivable during a period

Cash outflow-financing activity

Sale of equipment for cash at carrying amount

Added in determining cash receipts from customers

Premises:

Purchase of land for cash

Decrease in merchandise inventory during a period

Conversion of bonds into common shares

Declaration and payment of a cash dividend

Decrease in accounts payable during a period

Issue of preferred shares for cash

Loss on sale of land

Depreciation expense

Decrease in accounts receivable during a period

Sale of equipment for cash at carrying amount

Responses:

Deducted in determining cash payments to suppliers

Cash outflow-investing activity

Cash inflow-investing activity

Is not shown

Deducted in determining cash receipts from customers

Significant noncash investing and financing activity

Added in determining cash payments to suppliers

Cash inflow-financing activity

Cash outflow-financing activity

Added in determining cash receipts from customers

Correct Answer:

Premises:

Responses:

Purchase of land for cash

Decrease in merchandise inventory during a period

Conversion of bonds into common shares

Declaration and payment of a cash dividend

Decrease in accounts payable during a period

Issue of preferred shares for cash

Loss on sale of land

Depreciation expense

Decrease in accounts receivable during a period

Sale of equipment for cash at carrying amount