Follow the guidelines. – Exercise 1

Exercise 1

Classify each of the following transactions as an operating activity, an investing activity or a financing activity cash flow, or a non cash transaction – Indicate also its effect on the Income statement (increase or decrease the profit)
Provide services for cash
Purchase marketable securities for cash
Paid cash for rent
Received interest on note receivable
Paid cash for salaries
Received advance payment for services
Paid a cash dividend
Provide services on account
Bought land with cash
Collected cash from receivables
Issued common stock for cash
Repaid principal and interest on a note payable
Declared a stock split
Purchased inventory with cash
Recorded depreciation of fixed asset
Paid insurance with cash
Issued a note payable in exchange for equipment

Exercise 2

Prepare the statement of Cash flows for 2007, using the indirect method, with the financial statements and additional information as below:

Additional information
Purchased land for $ 112,000
Purchased new equipment for $ 100,000
Sold old equipment that costs $ 132,000 with accumulated depreciation of $ 112,000 for 20,000 cash
Issued common stock for $ 50,000

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