Question

multiple choice question

credits to the common stock account recorded during the period will be reported as cash ________ activities on the statement of cash flows.

outflows under investing
inflows under financing
inflows under investing
outflows under financing

Explanation:

Analyze the transaction

A credit to the Common Stock account represents an increase in common stock, which typically occurs when a corporation issues new shares of stock to investors in exchange for cash.

Determine the cash flow direction

Since the company is issuing stock to investors, it receives cash from them. Therefore, this transaction results in a cash inflow.

Classify the cash flow activity

Transactions involving equity (such as issuing stock or paying dividends) and long-term debt are classified as financing activities on the statement of cash flows. Thus, the cash received is reported as cash inflows under financing activities.

Answer:

• outflows under investing
• inflows under financing (Correct answer)
• inflows under investing
• outflows under financing