Question

Sam's Sporting Goods is a company that sells sports apparel and equipment. Sam's Sporting Goods experienced the following transactions during 2019. Determine if each transaction should be classified as an operating, investing, or financing activity. Also label each transaction as a cash inflow or outflow. 1. Sam's Sporting Goods collected $150,000 from customers for apparel sales. 2. Sam's Sporting Goods borrowed $40,000 from a bank. 3. Sam's Sporting Goods repaid $20,000 to the bank. 4. Sam's Sporting Goods paid salaries totaling $25,000. 5. Sam's Sporting Goods spent $75,000 cash to purchase a new building. 6. Sam's Sporting Goods collected $37,000 from shareholders for the issuance of common stock. 7. Sam's Sporting Goods put $9,000 in a certificate of deposit. 8. Sam's Sporting Goods paid a $6,000 dividend to its shareholders. 9. Sam's Sporting Goods paid $430 to the electric company for December utilities. 10. Sam's Sporting Goods paid its suppliers $17,200 to purchase inventory.

Answer 1

Question 1

Collection of Cash from Customers for Sales of Apparels is an ordinary course of activity for the Sams Business. This is the transaction which is an operating or part of the daily routine part of the he business.

The transaction belong to operating activity and it is an inflow of cash.

Question 2

Borrowing from Bank is not a regular course of transaction from the business point of Sam's Apparels. It is a type of finance that has been arranged to meet out the expansion requirement of the business.

The transaction is in the nature of Financing Activity and it is an inflow of Cash.

Question 3

The money repaid to the bank is for the borrowings made from the bank which is not an operating or routine activity for Sam's business. It is the nature of Financing Activity.

The transaction is in tha nature of Financing Activity and it is an outflow of cash.

Question 4

Payment of Salary is that activity or part which the business has to perform.on regular basis to keep the business going and it is operating activity for the business.

The transaction of payment of salaies is an operating activity and an outflow of cash.

Question 5

Money being spent for the purchase of building is the investment made by the business for its growth in the future and it is a part of Investing Activity.

The transaction of Purchase of New Building is an Investing Activity and an outflow of cash.

Question 6

The issue of stock to common public is for the arrange of finance for the business legal and financial requirements and it is a prominent example of Financing Activity.

The transaction of Cash collected from issue of stock is in the nature of Financing Activity and an inflow of cash.

Question 7

If the deposit is made for a shorter period of time then it should be treated as part of cash and cash equivalents and an outflow of cash.

If the deposit is for a longer term.then it is a Financing Activity and an outflow of cash.

Question 8

Payment of dividend to the shareholders is an activity of repaying to the owners the return on investment made by them and it is the nature of Financing Activity.

The transaction regarding payment of dividends is in the nature of Financing Activity and an outflow of cash.

Question 9

The payment of operating expenses are an essential part of the day to day expenses or operating expenses of the business to run the business.

The transaction regarding payment of utility bills of electricity is an example of operating Activity and an outflow of cash.

Question 10

Payment to suppliers for Inventory supplies is an essential business activity to keep the business on track and going and in the nature of operating activities of business.

Payment to supplier is an example of operating Activity and an outflow of cash.