Which Transactions Affect Cash Flow from Operations?

Explanation

To determine which of the given options would have an effect on cash flow from operations, let's analyze each option:

I. Sale of machinery for $50,000 with a net book value of $35,000. When machinery is sold, the transaction affects the cash flow from operations. The cash received from the sale of machinery is an inflow of cash, and it is reported in the cash flow statement as a positive amount. In this case, the cash flow from operations would increase by $50,000.

II. Purchase of supplies on credit. The purchase of supplies on credit does not directly affect the cash flow from operations. The payment for supplies will be made at a later date, resulting in a cash outflow at that time. Cash flow from operations only includes cash inflows and outflows that result directly from core business activities, such as revenue and expenses. Since this transaction does not involve cash, it does not impact the cash flow from operations.

III. Remittance by customer in payment of goods purchased last accounting period. When a customer remits payment for goods purchased in a previous accounting period, it affects the cash flow from operations. The cash received from the customer is considered an inflow of cash, and it is reported as a positive amount in the cash flow statement. This transaction increases the cash flow from operations.

IV. Lease payment on machinery, which is accounted for as a capital lease. Lease payments on machinery accounted for as a capital lease are classified as cash outflows from operating activities. These lease payments are considered part of the regular operations of the business and are included in the calculation of cash flow from operations.

Based on the analysis above, the options that would have an effect on cash flow from operations are:

I. Sale of machinery for $50,000 with a net book value of $35,000. III. Remittance by customer in payment of goods purchased last accounting period. IV. Lease payment on machinery, which is accounted for as a capital lease.

Therefore, the correct answer is:

B. I, III, and IV.