Red Hot Chili Peppers Co. had the following activity in its most recent year of operations. Classify the items as (1) operating - add to net income; (2) operating - deduct from net income; (3) investing; (4) financing; or (5) significant noncash investing and financing activities. Use the indirect method.

(a)Purchase of equipment.
(b)Redemption of bonds payable.
(c)Sale of building.
(d)Depreciation.
(e)Exchange of equipment for furniture.
(f)Issuance of capital stock.
(g)Amortization of intangible assets.
(h)Purchase of treasury stock.
(i)Issuance of bonds for land
(j)Payment of dividends.
(k)Increase in interest receivable on notes receivable.
(l)Pension expense exceeds amount funded.

(a) Purchase of equipment: investing; it is an outflow.

(b) Redemption of bonds payable: financing; it is an outflow.

(c) Sale of building: investing; it is an inflow.

(d) Depreciation: operating - add to net income.

(e) Exchange of equipment for furniture: significant noncash investing and financing activities.

(f) Issuance of capital stock: financing; it is an outflow.

(g) Amortization of intangible assets: operating - add to net income.

(h) Purchase of treasury stock: financing; it is an outflow.

(i) Issuance of bonds for land: significant noncash investing and financing activities.

(j) Payment of dividends: financing; it is an outflow.

(k) Increase in interest receivable on notes receivable: operating - deduct from net income.

(l) Pension expense exceeds amount funded: operating - add to net income.

Explanation:

A financial statement in accounting are written reports that measures an organization's financial performance, strength and liquidity over a specific accounting period. Financial performance is a summary of how an organization incurs both revenues and expenses with respect to its operating and non-operating activities.

The indirect method of cash-flow statements, adjusts net income for activities or items that affects reported net income or loss rather than cash.

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