Chapter 14, Problem 14.3SE

Classifying items on the indirect statement of cash flows

Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to consider in preparing the statement:

1. a. Increase in accounts payable
2. b. Payment of dividends
3. c. Decrease in accrued liabilities
4. d. Issuance of common stock
5. e. Gain on sale of building
6. f. Loss on sale of land
7. g. Depreciation expense
8. h. Increase in merchandise inventory
9. i. Decrease in accounts receivable
10. j. Purchase of equipment

Identify each item as a(n):

• Operating activity-addition to net income (O+) or subtraction from net income (O–)
• Investing activity–cash inflow (I+) or cash outflow (I–)
• Financing activity-cash inflow (F +) or cash outflow (F–)
• Activity that is not used to prepare the indirect statement of cash flows (N)