Questions and Answers
What classification is 'Payment of interest on notes payable'?
What classification is 'Exchange of land for patent'?
What classification is 'Sale of building at book value'?
What classification is 'Payment of dividends'?
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What classification is 'Depreciation'?
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What classification is 'Receipt of dividends on investment in stock'?
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What classification is 'Receipt of interest on notes receivable'?
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What classification is 'Issuance of common stock'?
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What classification is 'Amortization of patent'?
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What classification is 'Issuance of bonds for land'?
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What classification is 'Purchase of land'?
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What classification is 'Conversion of bonds into common stock'?
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What classification is 'Sale of land at a loss'?
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What classification is 'Retirement of bonds'?
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Study Notes
Classification of Cash Flow Activities
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Payment of interest on notes payable classified as an Operating Activity under the indirect method, impacting net income.
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Exchange of land for patent represents a Noncash Investing and Financing Activity, reflecting significant asset exchanges without cash transactions.
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Sale of building at book value categorized as an Investing Activity, involving the sale of long-term assets for cash or cash equivalents.
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Payment of dividends falls under Financing Activity, showcasing cash flows related to shareholder returns.
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Depreciation is considered an Operating Activity, serving as a non-cash adjustment in operating cash flow calculations.
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Receipt of dividends on investment in stock is labeled as an Operating Activity, contributing to cash inflows from investments.
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Receipt of interest on notes receivable classified as an Operating Activity, indicating cash earned from interest-bearing accounts.
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Issuance of common stock categorized as a Financing Activity, associated with raising funds through equity.
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Amortization of patent is considered an Operating Activity, affecting operating income without immediate cash impact.
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Issuance of bonds for land counts as a Noncash Investing and Financing Activity, reflecting long-term asset acquisitions funded through debt.
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Purchase of land classified as an Investing Activity, involving cash outflows to acquire property.
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Conversion of bonds into common stock recognized as a Noncash Investing and Financing Activity, demonstrating changes in capital structure without cash exchange.
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Sale of land at a loss identified as an Operating Activity, reflecting a loss impact on net income despite being an asset sale.
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Retirement of bonds is categorized as a Financing Activity, indicating the outflow of cash for settling liabilities.
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Description
Test your knowledge on the classification of cash flow items using the four major categories: operating activities, investing activities, financing activities, and significant noncash investing and financing activities. Each flashcard presents an item that you must correctly classify.
