Springsteen Co. had the following activity in its most recent year of operations.

1. Pension expense exceeds amount funded.
2. Redemption of bonds payable
3. Sale of the building at book value
4. Depreciation
5. Exchange of equipment for furniture
6. Issuance of ordinary shares
7. Amortization of intangible assets
8. Purchase of treasury shares
9. Issuance of bonds for land.
10. Payment of dividends
11. Increase in interest receivable on notes receivable
12. Purchase of equipment.

Instructions Classify the items as (1) operating—add to net income, (2) operating—deduct from net income, (3) investing, (4) financing, or (5) significant non-cash investing and financing activities. Use the indirect method.

S.no.

Items

Activity

Explanation

a

Pension expense exceeds amount funded

Operating-add to net income

Pension expense is the sum a company deducts from revenue to cover its obligations for employee pension liabilities. It is also a big part of the company’s operating expenses.

b

Redemption of bonds payable

Financing

The financing center is the cash generated and paid within the company's efforts to gather and pay debts.

c

Sale of the building at book value

Investing

Long-term asset procurement or disposal are considered investing activities. This could apply to acquiring marketable securities, selling a building, or securing a business vehicle.

d

Depreciation

Operating-add to net income

Depreciation is regularly detailed as an indirect operating thing on the income statement. It is an authorized expense that, together with other indirect costs like regulatory and marketing expenses, lowers a company's gross profit.

e

Exchange of equipment for furniture

Significant non-cash investing and financing

These non-cash operations may include obsolescence as well as depreciation and amortization. On the balance statement, property, plant, and gear are recorded. Devaluation or amortization records these things in discrete amounts on the salary statement.

f

Issuance of ordinary shares

Financing

According to the sum of offers they own, it gives financial specialists proprietorship within the company. Due to the absence of a debt component, it may be a phenomenal source of financing. Ordinary shareholders have a few rights as the company's owners, including the power to vote.

g

Amortization of intangible assets

Operating-add to net income

Retained earnings within the stockholders' value portion of the balance sheet are diminished by yearly amortization expense, which influences net income on the income statement. Income fewer costs rise to net income.

h

Purchase of treasury shares

Financing

In the statement of cash flows, the acquisition of Treasury Stock is categorized as a Financing activity.

i

Issuance of bonds for land

Significant non-cash investing and financing

To raise debt capital, businesses issue bonds. Cash flows into and out of these bonds occur at various points.

j

Payment of dividends

Financing

Dividend payments are mostly seen as financing activities since they are made to the speculators (shareholders) who co-financed the trade.

k

Increase in interest receivable on notes receivable

Operating-deduct from net income

An increase in accounts receivable indicates that customers who made credit purchases have not yet paid for all the credit sales the business reported on its revenue statement. So, we deduct the rise in accounts receivable from the business's net income.

l

Purchase of equipment

Investing

Any actions that directly impact long-term assets are referred to as investing activities. This can involve buying or selling property, investing in stocks, or buying or selling equipment.