Q1. Investing activities include cash transactions that primarily affect the purchasing and selling of (current assets / ______________ / current liabilities / long-term liabilities / stockholders’ equity). (Circle all that apply)
Q2. Identify the transactions that are recorded in the investing section of the statement of cash flows.
(___________ / Not) a. Sell equipment.
(Investing / ___________) b. Pay rent for the next accounting period. (Operating)
(___________ / Not) c. Purchase office building.
(Investing / ___________) d. Issue additional shares of your company’s common stock. (Financing)
(___________ / Not) e. Purchase 1,000 shares of common stock in Best Buy Company, Inc.
(Investing / ________) f. Receive $560 in dividends from Best Buy Company, Inc. (Operating)
(___________ / Not) g. Sell the 1,000 shares of Best Buy Company, Inc. at a loss.
Q3. A net cash inflow results from (purchasing / ___________) more property, plant, and equipment. If a company is selling income-producing assets, resulting future revenues will most likely be (higher / ___________), which is considered (favorable / ___________). However, if the asset being sold is an unprofitable division, then it would be considered (___________/ unfavorable).
Q4. A net cash inflow results from (purchasing / ___________) investment securities. If the reason for selling the investments is to take profits, this is considered (___________/ unfavorable). If the reason for selling the investments is to finance operations, this is considered (favorable / ___________). If a gain is realized on the sale of assets (more / less / ___________) cash will be received if a loss is reported.
Q5. Refer to the accounting information immediately above to answer the following questions.
a. From the sale/purchase of PPE, LUV has a net cash (inflow / ___________), which indicates the company is (___________/ selling) more PPE. This most likely indicates the business is (___________/ down-sizing). What PPE items is LUV most likely purchasing/selling?
b. For investing activities, LUV reports a (_______ / weak) cash position. Why?

  • CreatedSeptember 17, 2015
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