Identify the Statement of Cash Flow Section For each of the transactions below, determine whether it involves an operating activity, investing…

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Identify the Statement of Cash Flow Section

For each of the transactions below, determine whether it involves an operating activity, investing activity or financing activity.  For each item, place an “X” in the appropriate column.

Transaction

Operating Activity

Investing Activity

Financing Activity

Office supplies were purchased for cash.

 

 

 

Dividends were declared and paid.

 

 

 

Bonds payable with a face value of $100,000 were sold for cash at 96.

 

 

 

A building was purchased and paid for.

 

 

 

Treasury stock was sold.

 

 

 

Accounts Payable were paid off.

 

 

 

Common stock of another firm was purchased for cash.

 

 

 

A machine with an original cost of $30,000 was sold for $7,000. Accumulated Depreciation to date was $23,000.

 

 

 

Short-term marketable securities (not cash equivalents) were sold.

 

 

 

Interest expense on the bonds above was paid in cash.

 

 

 

Land was purchased for cash.

 

 

 

Dividends were received on the common stock acquired above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Use the following data for ABC Music Co. to prepare a statement of cash flows using the indirect method for the year ended June 30, 2016.

ABC Music Co.

Income Statement

For the Year Ended June 30, 2016

 

 

 

Net Sales

 

$350,000

Less Expenses

 

 

  Cost of Goods Sold

$200,000

 

  Depreciation Expense

    20,000

 

  Administrative Expenses

    52,000

 

  Selling Expenses

    45,000

 

  Loss on Sale of Investment

         500

 

Total Expenses

 

  317,500

Net Income

 

$  32,500

 

ABC Music Co.

Comparative Balance Sheets

June 30 2016 and 2015

Assets

2016

2015

Cash

$  4,500

$ 15,000

Accounts Receivable (net)

  35,000

   27,500

Inventory

  40,000

   50,000

Prepaid Expenses

     3,000

     2,500

Long Term Investments

   20,000

   25,000

Plant and Equipment

   80,000

   40,000

Accumulated Depreciation

 (20,000)

  (12,000)

Total Assets

$162,500

$148,000

 

 

 

Liabilities

 

 

Accounts Payable

$   2,000

$   6,000

Wages Payable

        220

        260

Taxes Payable

        780

        740

Notes Payable

  20,000

   12,000

Total Liabilities

$23,000

$ 19,000

 

 

 

Stockholders’ Equity

 

 

Common Stock

$ 65,000

$  65,000

Retained Earnings

   81,500

    64,000

Total Paid in Capital and Retained Earnings

146,500

 129,000

               Less: Treasury Stock

 (  7,000)

             0

Total Stockholders’ Equity

$139,500

$129,000

Total Liabilities and Stockholders’ Equity

$162,500

$148,000

Additional Information:

·         A plant asset costing $20,000 was sold for its book value of $8,000. And additional plant asset was purchased for $60,000.

·         A long term investment was sold for $4,500.

·         The outstanding notes are long term. An $8,000 note was issued during 2016.

·         Common stock was repurchased.

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