Prestige Manufacturing Corporation reports the following items in its statement of cash flows presented using the direct method. Indicate whether each item is disclosed in the operating activities (O), investing activities (1I), or financing activities (F) section of the statement under GAAP or use (NA) if the item does not appear on the statement. 1. Payment for equipment purchase. 2. Repayments of bank loan. 3. Dividends paid. 4. Proceeds from issuance of stock. 5. Interest paid. 6. Receipts from customers.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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**Understanding Cash Flow Statements: Direct Method**
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**Prestige Manufacturing Corporation** reports the following items in its statement of cash flows presented using the direct method. Indicate whether each item is disclosed in the operating activities (O), investing activities (I), or financing activities (F) section of the statement under GAAP (Generally Accepted Accounting Principles) or use (NA) if the item does not appear on the statement.

**Cash Flow Statement Items:**

1. **Payment for equipment purchase.**
   - [ ]

2. **Repayments of bank loan.**
   - [ ]

3. **Dividends paid.**
   - [ ]

4. **Proceeds from issuance of stock.**
   - [ ]

5. **Interest paid.**
   - [ ]

6. **Receipts from customers.**
   - [ ]

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**Instructions:** For each item listed, determine and indicate the appropriate classification—whether it belongs to:
- **Operating Activities (O):** Day-to-day business operations, such as receipts from sales of goods and services.
- **Investing Activities (I):** Transactions involving the acquisition and disposal of long-term assets and other investments, like the purchase or sale of equipment.
- **Financing Activities (F):** Changes in the size and composition of the equity capital and borrowings of the entity, including transactions that affect the equity and borrowings, such as issuance of stock and loan repayments.
- Use (NA) if the item does not appear on the statement.

By correctly classifying these items, users can better understand the cash inflows and outflows of Prestige Manufacturing Corporation, contributing to more effective financial analysis and decision-making.
Transcribed Image Text:**Understanding Cash Flow Statements: Direct Method** --- **Prestige Manufacturing Corporation** reports the following items in its statement of cash flows presented using the direct method. Indicate whether each item is disclosed in the operating activities (O), investing activities (I), or financing activities (F) section of the statement under GAAP (Generally Accepted Accounting Principles) or use (NA) if the item does not appear on the statement. **Cash Flow Statement Items:** 1. **Payment for equipment purchase.** - [ ] 2. **Repayments of bank loan.** - [ ] 3. **Dividends paid.** - [ ] 4. **Proceeds from issuance of stock.** - [ ] 5. **Interest paid.** - [ ] 6. **Receipts from customers.** - [ ] --- **Instructions:** For each item listed, determine and indicate the appropriate classification—whether it belongs to: - **Operating Activities (O):** Day-to-day business operations, such as receipts from sales of goods and services. - **Investing Activities (I):** Transactions involving the acquisition and disposal of long-term assets and other investments, like the purchase or sale of equipment. - **Financing Activities (F):** Changes in the size and composition of the equity capital and borrowings of the entity, including transactions that affect the equity and borrowings, such as issuance of stock and loan repayments. - Use (NA) if the item does not appear on the statement. By correctly classifying these items, users can better understand the cash inflows and outflows of Prestige Manufacturing Corporation, contributing to more effective financial analysis and decision-making.
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