Group 1 Problem 9-8

1. Group 1Problem 9-8 Nairi Southyda Anida Luke Alex

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

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

4. Question b Paid an account payable in cash • Operating Cash flow will decrease

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

6. 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.

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

8. Question f Paid accrued interest expense • decrease in operating cash flows • pay liability with cash

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

10. 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.

11. 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

12. THE END! Accounting is FUN!