 In this presentation, we will take a look at multiple choice questions related to the statement of cash flows. First question, which is not included in cash flows from investing activities? Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. A. Cash paid to purchase equipment B. Cash paid for dividends C. Cash paid for intangible assets D. Cash paid for securities And E. Cash received from the sale of equipment. So let's go through this again using the process of elimination, which is not included in cash flows from investing activities. Now the way I would go through these is we got to go through each one of these to really to be fully sure on these and try to think of the journal entry and go through our thought process here. So A says cash paid to purchase equipment. Now we're looking for the investing activities. So cash paid to purchase equipment, journal entry would be to debit equipment and credit cash. And we go through our questions there is that is there an income statement account there? No. We would buy an equipment which is an asset account. Did we buy something of substantial value? Yes. We bought equipment and therefore it would be investing so it's not operating because there's not an income statement account in the journal entry typically. And then we are buying an asset we're investing in something therefore it would be investing not the answer because we're looking for something that's not included in investing. And then B says cash paid for dividends. If we think about that journal entry we would debit the retained earnings and credit cash. Going through our questions we would say is there an income statement account there? No. Because we don't have revenue or expenses. Did we buy anything there of substantial value? No. Because we're just paying the owners we're giving money back to the owners. And therefore this doesn't look like investing or operating but financing. So paying dividends looks like a financing activity. So that looks like a good answer we'll keep that for now. C says cash paid for intangible assets. So again if we go through our thought process we would say you know we would have to debit intangible asset and credit cash. So are either of those going to be income statement accounts for revenue or expense? No. Not an operating activity. Did we buy something of a long term value? Looks like we did we bought an intangible asset so it looks like an investment. Looks like investing activities. So it might be a little bit confusing because it's intangible might throw us off a bit. But it looks like investments are going to keep that that looks good. So cash paid for securities. So this seems pretty straightforward because securities is like a type of investment. So you would think that if we paid cash for an investment that that would be an investing activity. And then E says cash received from the sale of equipment. So if we think about the journal entry there we would get debit cash and we would credit equipment possibly debit extremely depreciation. And then we would have something again or loss typically. And we might think well the gain or loss might be on the income statement. So maybe this one is an income statement operating activity rather than an investing. So I'll keep that for now. Both of this one more time which is not included in the cash flows from investing activities cash paid for dividends or cash received from the sale of equipment of those two I think the dividends is pretty clearly financing I know where that goes of the sale of equipment we might think maybe it's operating because if I do the journal entry I have a gain or loss which is on the income statement but typically it's going to be this is going to be a investing activity. And the gain or loss you can think is isn't really the cash related item because we're really looking for cash flows here. So that's why it's not really going to be a factor because we're the real cash flow is related to the sale of equipment which is going to be in the investing activities. Next question which is reported on the cash flows from operating activities a proceeds from collecting the principle of a loan receivable be cash from taking out a loan with the bank see cash from the sale of equipment. D payment for equipment or E receipts of cash sales. Let's go through this again using the process of elimination which is reported on cash flows from operating activities a proceeds from collecting the principle of a loan receivable. Now if we got the journal entry there if we think about the journal entry we would debit cash and we would credit the loan receivable and we're looking for for operating which of these cash flows from operating to activities. So that doesn't sound like an operating activity because there's no nothing related to the income statement there. So that doesn't look like an operating activity a B says cash from taking out a loan with a bank again we would debit cash and credit loan payable liability are either those income statement accounts. No so it doesn't look like it's operating that looks like a financing possibly C says cash from the sale of equipment. So we're going to debit cash and we're going to credit equipment possibly debit accumulated appreciation possibly have a gain or loss. So again we might think gain or loss is on the income statement. So maybe that has something to do with operating activities because there's a gain or loss so I'll keep that for now D says payment for equipment. That's going to be a journal entry debit equipment credit cash. So neither of those are going to be income statement accounts no revenue or expenses so probably not an operating activity. And then he says receipt of cash sales. So that's going to be a debit to cash and credit to sales which is clearly revenue or an income statement account. So you would think that that would be operating for sure. So of these two C and E let's read through this again which is reported as cash flows from operating activities either see cash from the sale of equipment or E receipts of cash sales. Now E seems pretty straightforward as as an operating type of activity. See we because there was that gain or loss we might think maybe that's operating but clearly E seems more correct more likely to be correct and the reason the gain or loss isn't in the operating activities because it's not really the cash flow part the cash flow part is how much cash we receive for the sale of the equipment. So that's why this see the cash flow is going to be in the investing activities.