Group 1 Problem 9-8 NairiSouthydaAnidaLukeAlex

Determining Cash Flow Effects For each of the following transactions, determine whether cash flows from operating activities will increase, decrease, or remain the same.

Question a Purchased merchandise on credit  Remain the same  No cash was used.

Question b Paid an account payable in cash  Operating Cash flow will decrease

Question c Accrued payroll for the month but did not pay it  decrease the cash flow when they report it and pay it

Question d Borrowed money from the bank. The term of the note is 90 days.  Remains the same  This is not a cash flow from operating activity—it is a financing activity.

Question e Reclassified a long-term note as a current liability  Remains the same  No cash flow occurs

Question f Paid accrued interest expense  decrease in operating cash flows  pay liability with cash

Question g Recorded a contingent liability based on a pending lawsuit  Remains the same  No cash flow occurs

Question h Paid back the bank for money borrowed in d. (Ignore Interest)  Operating Cash flow remains the same  This is a financing activity cash outflow.

Question i Collected cash from a customer for services that will be performed in the next accounting period (i.e. deferred revenues are recorded)  Operating Cash flow increases

THE END!  Accounting is FUN!