Which of the following statements is correct? A. The payment of a cash dividend reduces net income. B. Cash received from issuing common stock to stockholders is reported as a financing activity cash flow within the statement of cash flows. C. Providing services to a customer on account does not impact net income. D. The purchase of manufacturing equipment is reported within the statement of cash flows as a financing activity.

Question

Liberty Stark

Business

2 October, 09:32

Which of the following statements is correct? A. The payment of a cash dividend reduces net income. B. Cash received from issuing common stock to stockholders is reported as a financing activity cash flow within the statement of cash flows. C. Providing services to a customer on account does not impact net income. D. The purchase of manufacturing equipment is reported within the statement of cash flows as a financing activity.

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Answers (1)

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Jazmine Mcpherson · Answer 1

B. Cash received from issuing common stock to stockholders is reported as a financing activity cash flow within the statement of cash flows.

Explanation:

As when common stock is issued, it provides cash to the company, for any kind of investments, or expense to be made, for running the business.

Financing activities are those which arrange monetary assets generally cash for the company, issue of securities, issue of bonds, borrowings as loans or note payable.

Thus, the statement B is correct.

Further dividends are provided after tax, and are distribution from net income, but not shown under that.

Providing services on account will provide revenue and net income will increase.

Purchasing of any equipment is investing as it will create an asset for the company.