a) For each of the following transactions: o indicate whether it will result in
ID: 2561140 • Letter: A
Question
a) For each of the following transactions: o indicate whether it will result in an increase(+), decrease (, or have no effect (NE) on cash flows classify each of the transactions as an operating (O), investing (I), financing (F), or significant noncash investing/financing (NC) activity or no effect (NE) o Classification Impact (tor (E(NC or (NE) Repayment of mortgage payable Payment of interest on mortgage Purchase of land in exchange for common shares- Issue of preferred shares for cash. Collection of accounts receivable Declaration of cash dividend Payment of cash dividend Cash purchase of inventory . b) Selected information (CAD millions) are presented for two firms ROP and DUL operating in the same industries: DUL ROH Net income Net cash provided by operating activities Net cash provided (used) by investing activities Net cash provided (used) by financing activities 4,529, $ 161 , 6,539 212 35 (1,420) . 735 (176) 5,854S71 2,078267 Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 7,932 S 338 Reauired o Compare and discuss the performance/activity the two firms based on the above cash flow and net income information. Which firm appears to be in a stronger cash position. Why?»Explanation / Answer
Solution:
Since both the questions are individual question, I am solving the first one (Part (a). For Part b please ask separate question.
Question –a
Impact
Classification
(+), (-) or (NE)
(O), (I), (F), (NC) or (NE)
Repayment of mortgage payable
(-)
F
Payment of Interest on Mortgage
(-)
F
Purchase of Land in exchange for common share (No Effect since this transaction does not involve any cash outflow or inflow to business)
NE
NC
Issue of preferred shares for cash
(+)
F
Collection of accounts receivable
(+)
(O)
Declaration of cash dividend (Declaration of dividend does not include any cash flow. Payment of dividend involve cash flow)
NE
NC
Payment of Cash Dividend
(-)
F
Cash purchase of Inventory
(-)
O
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Impact
Classification
(+), (-) or (NE)
(O), (I), (F), (NC) or (NE)
Repayment of mortgage payable
(-)
F
Payment of Interest on Mortgage
(-)
F
Purchase of Land in exchange for common share (No Effect since this transaction does not involve any cash outflow or inflow to business)
NE
NC
Issue of preferred shares for cash
(+)
F
Collection of accounts receivable
(+)
(O)
Declaration of cash dividend (Declaration of dividend does not include any cash flow. Payment of dividend involve cash flow)
NE
NC
Payment of Cash Dividend
(-)
F
Cash purchase of Inventory
(-)
O
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