A software company acquires a smaller company in order to acquire the patents that it holds.Where will the cost of this acquisition be recorded on the statement of cash flows?
A)as an outflow under Operating Activities
B)as an outflow under Investment Activities
C)as an outflow under Financial Activities
D)The acquisition would not be recorded on the statement of cash flows.
E)as an inflow under Financial Activities

Question

Quizplus · Accepted Answer

The acquisition of a smaller company to acquire patents is considered an investment activity and the cost of acquisition will be recorded as an outflow of cash under the Investment Activities section of the statement of cash flows.

A Software Company Acquires a Smaller Company in Order to Acquire