Classify each transaction as either an operating activity, an investing activity, a financing activity, or a noncash investing and financing activity. 1. Common stock is sold for cash above par value. Select an option 2. Bonds payable are issued for cash at a discount. Select an option 3. Interest on a short-term note receivable is collected. Select an option 4. Merchandise is sold to customers for cash.

1. Common stock is sold for cash above par value.  Financing activity

2. Bonds payable are issued for cash at a discount.  Financing activity  

3. Interest on a short-term note receivable is collected. Operating activity

4. Merchandise is sold to customers for cash. Operating activity

Explanation:

Operating activity

Cash Flow from operating activities cash generated from to day to day activities of the business. All the cash flows needed to operate the business smoothly.

Interest on Account receivables and Sale of Merchandise are operating activities.

Investing activity

All the cash flows related to the fixed asset is called cash flows from the investing activities. Cash inflows from the sale fixed asset and cash outflows from the purchase of fixed assets are included in it.

There is no Investing activities in this question

Financing activity

Cash flow from financing activities is the cash inflows and outflows related to the Financing of the business. It includes the cash flows related to Financing from common stock, preferred stock, Debt etc.

Proceeds from issuance of common stock and bond is classified as cash flow from Financing activities.

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