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Identify as financial, investing or operating activity

2-2. Identify each of the issues above as involving a financial activity, an investing activity, or an operating activity.

1. The manager just submitted his resignation and the search for replacement must be organized.
2. A loan officer firm the company's bank just phoned saying that the company's application for a 400,000 loan was approved.
3. Bids from several vendors have been received regarding installation of a new computerized information system. One proposal must be selected.
4. Because the new bank's loan has been approved, two short-term loans can be paid off.
5. Old office furniture is waiting disposal.
6. A long-time customer is unhappy with the firm's latest architecture drawings for a new shopping center complex.
7. A new construction crane is being purchased.
8. An investor has approached Leonetta offering to purchase 20% of her company in exchange for cash.
9. The firm is considering the purchase of exclusive regional rights patented construction process.
10. One of the company's customers is behind on schedule payments. The amounts are large and Leonetta must decide whether to suspend construction on the project involved.

Refer to the information about financial statement below. I- income statement, B- Balance Statement and C - Cash Flow or N - Not true for any

1. The statement provides information about resources consumed during and accounting period.
2. The statement is dated as of a specific point in time.
3. The amounts that are owned to other organization or individuals are reported. .
4. The total amount of capital that has been contributed to the organization is reported.
5. The cash used for investing activities is reported.
6. Information is reported regarding the reward that has been earned from serving customers during the accounting period just ended.
7. Cash received from financial activities is reported.
8. The statement is not as of a specific date, but covers a period of time.
9. The statement contains information about the financial obligations that were made to acquire resources
10. The statement reports cash inflows and outflows.

Solution Preview

Problem 2-2

Cash Flow Statement

Operating activities have to do with the income statement.
Financing activities are sales or purchases of stock, dividend payments and loan activities.
Investing activities relate to purchase or sale of plant, property, other assets or securities.

The above items are matched as ...

Solution Summary

The solution provides the answers to the problems together with some commentary in explanation.