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Analysis of an income statement, balance sheet, and additional information from the accounting records of Gadgets, Inc., reveals the following items. Required: Select the section of the statement of cash flows in which each of these items would be reported: operating activities (indirect method), investing activities, financing activities, or a separate noncash activities note.

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Answer:

Find in the attached the items to place under the right cash flows statement heading:

Find the classification below:

Explanation:

Purchase of patient is an outflow under the investing activities just like purchase of property meant for business use.

Depreciation is added to net income under the operating activities the same way amortization of patent is to be added.

Decrease in accounts receivable relates to changes in working capital under operating activities

Issuance of a notes payable features under the financing activities

Increase in inventory is an operating activities item.

Collection of notes receivable relates to working capital,it is an operating activities

Purchase of equipment is an outflow under the investing activities

Exchange of long term assets does not involve any cash transfer,it is better dealt with as a separate non-cash activities note

Decrease in accounts is an operational transaction,it is under the operating activities.

Lastly the payment of dividends is a financing activities' items as it relates to providers of finance.

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The activities of the cash flow statement verify the various operational activities that judge the accounting records of the firm. The growth and the survival of the firm emphasize financial stability.

  • Purchase of patient is an outflow under the investing activities just like the purchase of property meant for business use.
  • Depreciation is added to net income under the operating activities the same way amortization of patent is to be added.
  • Decrease in accounts receivable relates to changes in working capital under operating activities
  • Issuance of a notes payable features under the financing activities
  • Increase in inventory is an operating activities item.
  • Collection of notes receivable relates to working capital, it is an operating activity
  • Purchase of equipment is an outflow under the investing activities
  • Exchange of long term assets does not involve any cash transfer, it is better dealt with as a separate non-cash activities note
  • A decrease in accounts is an operational transaction, it is under the operating activities.
  •  The payment of dividends is a financing activities item as it relates to providers of finance.

To know more about the classification of the different activities of the cash flow statement, refer to the link below:

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