Presented below are several transactions that were completed during the year by
ID: 2476400 • Letter: P
Question
Presented below are several transactions that were completed during the year by Curves, a women’s health club. Determine how each transaction will be reported in a statement of cash flow by selecting the letter abbreviation of the cash flow effect. Curves uses the indirect method to prepare its statement of cash flow.
Cash Flow Effects
A = Added in operating activity section
E = Inflow from financing activity
B = Subtracted in operating activity section
F = Outflow for financing activity
C = Inflow from investing activity
X = Not reported on the statement of
D = Outflow for investing activity
cash flow under the indirect method
Transactions
Purchased equipment for cash
Interest payable increased
Issued stock to investors
Paid cash dividends
Increase in salaries payable
Repaid a mortgage bank loan
Purchased inventory
Decrease in accounts payable
Purchased a marketable security
Amortization expense recorded
Sold machine for cash
Purchased a copyright
Depreciation expense recorded
Salaries payable decreased
Cash Flow Effects
A = Added in operating activity section
E = Inflow from financing activity
B = Subtracted in operating activity section
F = Outflow for financing activity
C = Inflow from investing activity
X = Not reported on the statement of
D = Outflow for investing activity
cash flow under the indirect method
Explanation / Answer
Transactions D Purchased equipment for cash A Interest payable increased E Issued stock to investors F Paid cash dividends A Increase in salaries payable F Repaid a mortgage bank loan X Purchased inventory B Decrease in accounts payable D Purchased a marketable security A Amortization expense recorded C Sold machine for cash D Purchased a copyright A Depreciation expense recorded B Salaries payable decreased
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