A+ Solution 100% Correct with clear explanation.

Drexon Corp., which follows U.S. GAAP, uses the direct method to report its cash flows. The CFO is assessing the impact on cash flows of 12 events during the fiscal year. Specify which category each event falls under (under the direct method) and note whether it increases cash, decreases cash, or has no impact on cash:


#             Event

1             Accounts payable decreases from $400,000 to $385,000. 

2             An interest payment of $85,000 is made on a new debt issuance. 

3             Drexon purchases a trading security which it classifies as nonĀ¬current. 

4             A gain of $8,200 is booked on the sale of an asset. 

5             40,000 new shares of stock are issued near the close of the fiscal year. 

6             Dividends of $12,000 are paid on Drexon company stock. 

7             Capital expenditures of $35,000 are made for equipment used in day to day operations. 

8             Drexon purchases 60% of a subsidiary company. 

9             Depreciation and amortization expense totaling $50,000 is booked. 

10           Accounts receivable decreases from $620,000 to $610,000. 

11           Dividends of $6,500 are received from a stock classified as available for sale. 

12           Accrued liabilities increase from $245,000 to $250,000.

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