Cash Flows Classification Quiz

Classification of Cash Flow Activities

• Payment of interest on notes payable classified as an Operating Activity under the indirect method, impacting net income.

• Exchange of land for patent represents a Noncash Investing and Financing Activity, reflecting significant asset exchanges without cash transactions.

• Sale of building at book value categorized as an Investing Activity, involving the sale of long-term assets for cash or cash equivalents.

• Payment of dividends falls under Financing Activity, showcasing cash flows related to shareholder returns.

• Depreciation is considered an Operating Activity, serving as a non-cash adjustment in operating cash flow calculations.

• Receipt of dividends on investment in stock is labeled as an Operating Activity, contributing to cash inflows from investments.

• Receipt of interest on notes receivable classified as an Operating Activity, indicating cash earned from interest-bearing accounts.

• Issuance of common stock categorized as a Financing Activity, associated with raising funds through equity.

• Amortization of patent is considered an Operating Activity, affecting operating income without immediate cash impact.

• Issuance of bonds for land counts as a Noncash Investing and Financing Activity, reflecting long-term asset acquisitions funded through debt.

• Purchase of land classified as an Investing Activity, involving cash outflows to acquire property.

• Conversion of bonds into common stock recognized as a Noncash Investing and Financing Activity, demonstrating changes in capital structure without cash exchange.

• Sale of land at a loss identified as an Operating Activity, reflecting a loss impact on net income despite being an asset sale.

• Retirement of bonds is categorized as a Financing Activity, indicating the outflow of cash for settling liabilities.