Transactions include the following:

1. Declaration of stock dividend.

2. Purchase of 50 percent of the outstanding stock of another company.

3. Payment of previously accrued interest payable.

4. Accrual of interest expense.

5. Purchase of machinery.

6. Recognition of deprecation on machinery.

7. Purchase of treasury stock.

8. Sale of treasury stock at a price less than its original cost.

9. Conversion of debt to common stock.

10. Receipt of cash on an outstanding receivable.

11. Sale of inventory on account.

12. Purchase of inventory on account.

13. Declaration of dividends.

14. Receipt of dividends on short-term marketable securities.

15. Early retirement of outstanding long-term debt.

(a) Refer to figure in the text, and classify each transaction in one of the following categories:

(1) Exchanges with shareholders

(2) Exchanges of liabilities and shareholders equity

(3) Issue and payments of debt

(4) Purchases, sales, and exchanges of assets

(5) Operating transactions

(b) Briefly explain why the transaction are considered increasingly operating (or decreasingly financing) as the categories move from (1) to (5).

Transcribed Image Text:

Financing and Investing Transactions Operating Transactions Income Statement Balance Sheet Purchases, sales, and exchanges of assets Issues and Exchanges with sharcholders Exchanges of liabilities and sharebolders Revenues payments of debt Expenses equity