Multiple Choice
The statement of cash flows is a financial statement that shows ______.
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13. Statement of Cash Flows
Introduction to the Statement of Cash Flows
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The purchase of equipment and the sale of equipment would be shown on the Statement of Cash Flows as:
A
Purchase:Investing Sale:Financing
B
Purchase:Operating Sale:Financing
C
Purchase:Investing Sale:Investing
D
Purchase:Operating Sale:Investing
Verified step by step guidance1
Understand the classification of cash flows: The Statement of Cash Flows is divided into three sections: Operating, Investing, and Financing activities.
Identify the nature of purchasing equipment: Purchasing equipment is considered an investing activity because it involves acquiring long-term assets that will be used in the business.
Identify the nature of selling equipment: Selling equipment is also considered an investing activity because it involves disposing of long-term assets.
Analyze the options given: The options provided suggest different classifications for the purchase and sale of equipment.
Determine the correct classification: Both the purchase and sale of equipment should be classified under investing activities, as they involve the acquisition and disposal of long-term assets.
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