Reese Company is a young and growing company. You have been retained to advise Reese in the
preparation of their Statement of Cash Flows (indirect method). For the fiscal year ended December 31,
2024, you have obtained the following information concerning certain events and transactions of Reese.
1. Depreciation expense of $350,000 was included in the Income Statement.
2. A gain of $6,000 was realized on the sale of machinery. It originally cost $75,000, of which
$30,000 was undepreciated on the date of sale.
3. On July 1, 2024, building and land were purchased for $700,000. Reese gave in payment
$75,000 in cash, $200,000 market price of its unissued common stock, and signed a $425,000
mortgage note payable.
4. The amount of reported earnings for the fiscal year was $700,000, which included a deduction
for a loss of $110,000.
REQUIRED: Determine if each of the transactions should be classified as an operating, investing, or
financing activity on the Statement of Cash Flows. Also, identify the amount of each cash flow and whether
it was an inflow or outflow. The event or transaction may have multiple classifications!
Discussion 4 Requirement
Address the following question:
During the semester you have examined the financial statements and various ratios. Discuss the following:
In your opinion, which one financial statement provides the most valuable information for investment
decisions? Why?
If you had to choose only two ratios, which would provide the most relevant information for an investor?
Why?
Research Project Part 6:
Using the Cash Flow Statement and Notes for your company, answer the questions below:
1. From the Investing Activities section, what amount was spent on capital expenditures?
2. From the Financing Activities section, did the company buy back any of its own stock?
3. How would you describe your companies’ trend in liquidity?
