Cash Flow Classification: Direct and Indirect Task One and Two

AC2620: Module 5 Cash Flow and Performance Evaluation

Analysis 5.1

Cash Flow Classification: Direct and Indirect

1

In this assessment, you will perform two tasks, while exploring the concept of cash flow classification.

In Task 1, you will classify cash flows prepared on a direct basis; and in Task 2, you will classify cash flows

prepared on an indirect basis.

Use the Microsoft Excel template “AC2620_Analysis 5.1_Classifying Cash Flows.xlsx” from the Course

Resources to submit your answers.

Task 1: Classifying Cash Flows

The following are transactions, events, and changes in balances for Exeter Corporation for the past fiscal

year:

 Repurchase of the common stock

 Interest received

 Refund of income taxes

 Principal payment on long-term notes payable

 Cash paid to suppliers and employees

 Increase in accounts payable

 Purchase of property and equipment

 Proceeds from issuing a long-term note payable

 Cash paid as the result of a fine

 Principal payments under capital lease obligations

 Depreciation expense

 Payment of dividends on preferred stock

 Principal payments on mortgages

 Increase in accounts receivable

 Gain on sale of equipment

 Proceeds from issuing common stock

 Decrease in wages payable

 Declaration of a stock dividend

 Cash paid to suppliers for inventory

AC2620: Module 5 Cash Flow and Performance Evaluation

Analysis 5.1

Cash Flow Classification: Direct and Indirect

2

 Issuance of treasury stock for cash

 Loans to officers

 Issuance of common stock for land

 Proceeds from the sale of property, plant, and equipment

 Cash received from customers

 Decrease in prepaid insurance

Classify each of the above using one of the following categories. Assume the operating portion of the

statement of cash flows is prepared on a direct basis.

 Cash inflow from operating activities

 Cash outflow from operating activities

 Cash inflow from investing activities

 Cash outflow from investing activities

 Cash inflow from financing activities

 Cash outflow from financing activities

 Does not appear in the operating portion of a statement of cash flows prepared on a direct basis

Task 2: Classifying Cash Flows, Indirect Method

The following are line items that could be found in a statement of cash flows:

 Repurchase of common stock

 Interest received

 Refund of income taxes

 Principal payment on long-term notes payable

 Cash paid to suppliers and employees

 Increase in accounts payable

 Purchase of property and equipment

 Proceeds from issuing a long-term note payable

 Cash paid for taxes

 Principal payments under capital lease obligations

AC2620: Module 5 Cash Flow and Performance Evaluation

Analysis 5.1

Cash Flow Classification: Direct and Indirect

3

 Depreciation expense

 Payment of dividends on preferred stock

 Principal payments on mortgages

 Increase in accounts receivable

 Gain on sale of equipment

 Proceeds from issuing common stock

 Decrease in wages payable

 Declaration of a stock dividend

 Cash paid to suppliers for inventory

 Issuance of treasury stock for cash

 Long-term loans to officers

 Issuance of common stock for land

 Proceeds from the sale of property, plant, and equipment

 Cash received from customers

 Decrease in prepaid insurance

Classify each of the items as one of the following; assuming the operating portion of the statement of cash

flows is prepared on an indirect basis.

 Cash inflow from operating activities

 Cash outflow from operating activities

 Cash inflow from investing activities

 Cash outflow from investing activities

 Cash inflow from financing activities

 Cash outflow from financing activities

 Positive adjustment to net income

 Negative adjustment to net income

 Does not appear in the operating portion of the statement of cash flows prepared on an indirect

basis

AC2620: Module 5 Cash Flow and Performance Evaluation

Analysis 5.1

Cash Flow Classification: Direct and Indirect

4

 Non-cash transaction

Submission Requirements:

 Submit your answer in a Microsoft Excel file.

Evaluation Criteria:

The analysis rubric will be used to evaluate this assignment.