Question

The following transactions and events occurred during the year. Assuming that this company uses the direct method to report cash provided by operating activities, indicate where each item would appear on the statement of cash flows by placing an x in the appropriate column.

		Statement of Cash flow
		Operating Activities	Investing activities	Financing Activities	Non-cash investing and financing activities	Not reported on the statement or in notes
a	Retired long-term notes payable by issuing common stock
b	Paid cash toward accounts payable
c	Sold inventory for cash
d	Paid cash dividend that was declared in a prior period
e	Accepted six-month note receivable in exchange for plant assets
f	Recorded depreciation expense
g	Paid cash to acquire treasury stock
h	Collected cash from sales
i	Borrowed cash from bank by signing a nine-month note payable
j	Paid cash to purchase a patent

Short answer

1. Non-cash investing and financing activities
2. Operating activities
3. Operating activities
4. Financing activities
5. Non-cash investing and financing activities
6. Not reported on the statement or in notes
7. Financing activities
8. Operating activities
9. Financing activities
10. Investing activities

Step-by-step solution

Meaning of Cash Flow Statement

A statement that shows the cash flow inside and outside the business entity by categorizing it mainly into operating, investing, and financing activities is known as a cash flow statement.

Indicating each item and explain the reason

S.no.		Statement of Cash flow
		Operating Activities	Investing activities	Financing Activities	Non-cash investing and financing activities	Not reported on the statement or in notes	Explanation

a	Retired long-term notes payable by issuing common stock				X		Once the organization has received the funds from the lender, the principal amount from a long-term loan, or note payable, often shows in the financing activities part of the cash flow statement.
b	Paid cash toward accounts payable	X					Accounts Payable will be charged, and Cash will be credited when an account payable is paid. Subsequently, it reflects the recorded but unpaid vendor bills in Accounts Payable's credit balance. Accounts payable falls under the category of operating activities.
c	Sold inventory for cash	X					Since the sale of items affects net income through expenses, it would seem to constitute an operational activity (merchandise costs ultimately flow through the cost of goods sold on the income statement).
d	Paid cash dividend that was declared in a prior period			X			Dividend payments are often seen as financing activities since they are made to the investors (shareholders), who are essentially co-financing the business.
e	Accepted six-month note receivable in exchange for plant assets				X		This transaction is a non-cash activity of the business because plant assets are exchanged against the note receivable.
f	Recorded depreciation expense					X	Depreciation is added back when computing the indirect method of the cash flow statement since it is subtracted from the net profit calculation and is not a cash item. Depreciation is, in essence, an accounting metric that is subtracted from revenue or net sales to determine the company's cash flow.
g	Paid cash to acquire treasury stock			X			In the statement of cash flows, the acquisition of Treasury Stock is categorized as a financing activity. The acquisition of other firms' equity securities as an investment shows a cash outflow from investing operations.
h	Collected cash from sales	X					The total of your cash receipts for the accounting period is your cash collection. Depending on the business operations one engages in, these cash receipts are divided into several categories in a cash receipt statement of cash flow.
i	Borrowed cash from the bank by signing a nine-month note payable			X			Once the organization gets the funds from the lender, the principal amount from a long-term loan, or note payable, often shows in the financing activities part of the cash flow statement.
j	Paid cash to purchase a patent		X				Report the patent acquisition by including an outflow for the entire amount paid for the patent on the statement of cash flows. Information from the general ledger is adequate to report this purchase. The operational portion covers patent-related amortization.