Question$1.$Classify the following cash flows as either operating $($O$),$ investing $($I$),$ or financing $($F$)$ activities.

$1.$ Sold stock investments for cash.

$2.$ Received cash payments from customers.

$3.$ Paid cash for wages and salaries.

$4.$ Paid cash dividends.

$5.$ Issued common stock for cash.

$$Marking Scheme: $1$ mark for each classification x $5=5$ Marks

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Question $2.$ The following information is available for ABC Corporation for the year ended December $31,2020$:

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Sales $$700,000$; operating expenses BD $50,000$; cost of goods sold BD $550,000$; preferred stock

dividend BD $40,000.$

The company purchased furniture worth of BD $15,000$

The company issued stock worth of BD $80,000$

The company taken bank loan of BD$40,000$

Cash at the beginning of the year is BD$35,000$

Cash at the end of the year is BD$200,000$

Required:

Prepare Cash flow Statement. $(10$ marks$)$

$$Marking Scheme: $(1\mathrm{.}25$ Mark for each step x $8=10$ marks$)$

Question$3.$ ABC Company reported retained earnings at December $31,2019,$ of $$210,000.$

The following transactions occurred during $2020.$

$1.$

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An error was discovered. In $2018,$ depreciation expense was recorded at $$60,000,$ but the correct amount was $$50,000.$

$2.$

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Declared cash dividend of $$90,000.$

$3.$

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Declared stock dividend of $$80,000.$

$4.$

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Net income was $$250,000.$