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    Identifying a Transaction by Cash Flow Category

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    Identify whether each transaction below is an operating, investing or financing activity. Assume the indirect method.

    A. Purchase of plant seeds.
    B. Increase in accounts payable.
    C. Decrease in accounts receivable.
    D. Payment of long-term loan
    E. Net income
    F. Depreciation expense.
    G. Payment of dividends.
    H. Issuing stock
    I. Increase in investing.
    J. Decrease in taxes payable

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    Solution Preview

    A. Purchase of plant seeds: Because plant seeds are inventory items, the purchase is an Operating activity. O
    B. Increase in accounts payable: Because accounts payable are usually used to pay vendors, its increase is an Operating activity. O
    C. Decrease in accounts receivable: Because accounts receivable is amounts due from customers, ...

    Solution Summary

    This solution discusses how certain transactions are classified on a statement of cash flows and why they are classified that way.