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Chapter 5: Q24Q. (page 238)

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

Short Answer

Expert verified

Operating activities include all the transactions used in determining net income having a cash effect. Investing activities include acquiring and disposing of fixed assets and investments for cash.Financing activities include capital generating activities.

Step by step solution

01

Definition of Fixed Assets

All the assets or resources acquired to use in business operations for the long run and generating benefits are fixed assets.

02

Difference between all three activities reported in the statement of cash flow

  1. The operating activities section of the balance sheet reports ordinary business functions. It includes changes in current assets and liabilities and non-cash expenses.
  2. Investing activities include only the transaction providing a cash sale and purchase of fixed assets or investments.
  3. Financing activities include issuing and redeeming securities of any type for cash.

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Most popular questions from this chapter

E5-11 (L03) EXCEL (Balance Sheet Preparation) Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2017.

Particular

Debit

Credit

Cash

\(?

Supplies

1,200

Prepaid insurance

1,000

Equipment

48,000

Accumulated depreciation 鈥� Equipment

\)4,000

Trademarks

950

Accounts payable

10,000

Salaries and wages payable

500

Unearned service revenue

2,000

Bonds payable (due 2024)

9,000

Common stock

10,000

Retained earnings

25,000

Service revenue

10,000

Salaries and wages expenses

9,000

Insurance expenses

1,400

Rent expenses

1,200

Interest expenses

900

Total

\(?

\)?

Additional information:

1. Net loss for the year was $2,500.

2. No dividends were declared during 2017.

Instructions

Prepare a classified balance sheet as of December 31, 2017.

What is the relationship between current assets and current liabilities?

The creditors of Chester Company agree to accept promissory notes for the amount of its indebtedness with a proviso that two-thirds of the annual profits must be applied to their liquidation. How should these notes be reported on the balance sheet of the issuing company? Give a reason for your answer

BE5-8 (L03) Included in Adams Company鈥檚 December 31, 2017, trial balance are the following accounts: Accounts Payable \(220,000, Pension Liability \)375,000, Discount on Bonds Payable \(29,000, Unearned Rent Revenue \)41,000, Bonds Payable \(400,000, Salaries and Wages Payable \)27,000, Interest Payable \(12,000, and Income Taxes Payable \)29,000. Prepare the current liabilities section of the balance sheet.

Hawthorn Corporation鈥檚 adjusted trial balance contained the following accounts at December 31, 2017: Retained Earnings \(120,000, Common Stock \)750,000, Bonds Payable \(100,000, Paid-in Capital in Excess of Par鈥擟ommon Stock \)200,000, Goodwill \(55,000, Accumulated Other Comprehensive Loss \)150,000, and Noncontrolling Interest $35,000. Prepare the stockholders鈥� equity section of the balance sheet.
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