P171A SolutionAnswer Transaction Statement of Cash Flows Act

P17-1A

Solution

Answer-

Transaction	Statement of Cash Flows Activity Affected	Cash Inflow, Outflow or No Effect
(a)	It is a non cash transaction, because charging depreciation on assets does not result in cash inflow or outflow.	No effect on cash flows.
(b)	Payment of interest affects financing activities and it will be added to profit in cash flow from operating activities and deducted in cash flow from financing activities	It results in cash outflow.
(c)	Cash proceeds from disposal of plant assets affects investing activities.	It results in cash inflow.
(d)	It is a non cash transaction, because land has been acquired by issuing common stock, it does not result in outflow of funds.	No effect on cash flows.
(e)	Payment of cash dividend to preference shareholders will affect financing activities.	It results in cash outflow.
(f)	Payment of cash dividend to preference shareholders will affect financing activities.	It results in cash outflow.
(g)	Cash sales will affect operating activities. It will not be shown anywhere in the cash flow statement but will form part of profit before tax.	It results in cash inflow
(h)	Recording sales on account is a non cash transaction.	No effect on cash flows.
(i)	Cash purchase of inventory will affect operating activities. It will not be shown anywhere in the cash flow statement but will form part of profit before tax.	It results in cash outflow.
(j)	Purchasing inventory on account is a non cash transaction.	No effect on cash flows.