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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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SOLUTION TO EXERCISE 13-2

  1. e
  2. g
  3. a
  4. d
  5. a
  6. b
  7. f
  8. c
  9. g
  10. g
  11. b
  12. b
  13. b
  14. e
  15. b
  16. f
  17. g
  18. b
  19. d
  20. a
  21. c
  22. f
  23. e
  24. b

Approach: Write down the definitions for investing activities, financing activities, and operating activities. (These definitions can be found in Illustration 13-1.) Analyze each transaction to see in which classification the transaction would be included. Watch for any transactions that do not result in a cash flow; they are noncash items.

Explanation:

  1. Issuance of stock for cash results in a cash inflow from financing activities.
  2. Issuance of stock in exchange for plant assets does not involve any flow of cash; the issuance of stock is a financing activity and the acquisition of plant assets is an investing activity. The transaction is a noncash financing and investing activity.
  3. The sale of services is a revenue transaction. The sale of services for cash results in an inflow of cash from operating activities.
  4. The purchase of an investment for cash results in an outflow of cash from investing activities.
  5. The collection of accounts receivable constitutes a cash inflow from a customer for a prior revenue transaction. A collection of cash from a customer is an inflow of cash from operating activities.
  6. The payment of accounts payable constitutes a payment to a supplier for inventory or other goods or services. There will be a related expense transaction either before the cash payment or after the time of cash payment. A payment to a vendor is an outflow of cash from operating activities.
  7. The payment of cash ...

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