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Differentiate between investing activities, financing activities, and operating activities.

Short Answer

Expert verified

Cash-related net pay operations are included in operating exercises. Cash-related noncurrent resource operations are considered investments. Cash transactions are financing activities, including owners' value and noncurrent liabilities.

Step by step solution

01

Meaning of Financing Activities

A trade’s net financing over a particular period is considered financing activities. The issuing and reimbursement of values, the payment of profits, the issuance and reimbursement of obligations, and capital rent obligations are all examples of financial activity.

02

Difference between investing, financing, and operating activities.

Lending cash, collecting on such credits, and obtaining and arranging investments and useful long-lived assets are two investing operations that regularly incorporate non-current resources.

On the other hand, financing activities include obligation and value components and include getting cash from creditors and paying back the money borrowed as well as getting capital from proprietors and giving them a return on their investment.

All acts and events are not contributing, or financing exercises are operating exercises. The cash results of exchanges utilized to calculate net income are a part of operating operations.

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Most popular questions from this chapter

Of what use is the statement of cash flows?

Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended December 31, 2017.

(a) Plant assets that had cost \(20,000 6 years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for \)5,300.

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(h) During the year, treasury stock costing $47,000 was purchased.

Instructions State where each item is to be shown in the statement of cash flows, if at all.

At January 1, 2017, Eikenberry Inc. had accounts receivable of \(72,000. At December 31, 2017, accounts receivable is \)54,000. Sales revenue for 2017 total $420,000. Compute Eikenberry’s 2017 cash receipts from customers.

Question: During 2017, Simms Company redeemed \(2,000,000 of bonds payable for \)1,880,000 cash. Indicate how this transaction would be reported on a statement of cash flows, if at all.

Question:Data for the Vince Gill Company are presented in E23-3.

Instructions

Prepare the operating activities section of the statement of cash flows using the direct method.

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