You are provided with the following transactions that took place during a recent fiscal year: 

Instructions

Assuming the company is reporting under IFRS, complete the above table for each of the following requirements. The first one has been done for you as an example.

(a) Classify each transaction as an operating activity (O), an investing activity (I), a financing activity (F), or a noncash transaction (NC) on the cash flow statement. If there is a choice of how a transaction is classified, indicate the alternative classifications.

(b) Specify whether the transaction will increase (+), decrease (€“), or have no effect (NE) on cash reported on the balance sheet.

(c) Specify whether the transaction will increase (+), decrease (€“), or have no effect (NE) on profit reported on the income statement.

TAKING IT FURTHER

Explain how an operating activity can increase cash but not increase profit?

Transcribed Image Text:

(c) Profit (a) (b) Classification Cash Transaction 1. Paid telephone bill for the month. 2. Sold equipment for cash, at a loss. 3. Acquired a building by paying 10% in cash and signing a mortgage payable for the balance. 4. Made principal repayments on the mortgage. 5. Paid interest on the mortgage. 6. Sold inventory on account, at a price greater than cost. 7. Paid wages owing (previously accrued) to employees. 8. Declared and distributed a stock dividend to common shareholders. 9. Paid rent in advance. 10. Sold inventory for cash, at a price greater than cost. 11. Wrote down the value of inventory to net realizable value, which was lower than cost. 12. Received semi-annual bond interest. 13. Received dividends on an investment in associate. 14. Issued common shares. 15. Paid a cash dividend to common shareholders. 16. Collected cash from customers on account. 17. Collected service revenue in advance.