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Statement of Cash Flows

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CHAPTER 23

Statement of Cash Flows

EXERCISE 23-1
E23-1 (Classification of Transactions) Springsteen Co. had the following activity in its most recent year of operations.
(a) Pension expense exceeds amount funded.
(b) Redemption of bonds payable.
(c) Sale of building at book value.
(d) Depreciation.
(e) Exchange of equipment for furniture.
(f) Issuance of ordinary shares.
(g) Amortization of intangible assets.
(h) Purchase of treasury shares.
(i) Issuance of bonds for land.
(k) Increase in interest receivable on notes receivable.
(j) Payment of dividends.
(l) Purchase of equipment.

a) Investing activity. b) Financing activity. c) Investing activity. d) Operating—add to net income. e) Significant noncash investing and financing activity. f) Financing activity. g) Operating—add to net income. h) Financing activity. i) Significant noncash investing and financing activity. j) Financing activity. k) Operating—deduct from net income. l) Operating—add to net income.

1. The statement of cash flows is divided into four activities. A. True B. False
There are three activities comprising the statement of cash flows.

2. The difference between the direct method and the indirect method centers around the operating activities section of the statement of cash flows. A. True B. False
The two methods only differ in the preparation of the operating activities section of the statement.

3. Only the comparative balance sheet is needed to prepare the statement of cash flows. A. True B. False
Preparation of the statement of cash flows requires the comparative balance sheet, the income statement, and selected transaction data.

4. An increase in accounts receivable will be added to net income under the indirect method of preparing the statement of cash flows. A. True B. False
Increases

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