Braden and Sons,Inc.paid cash to purchase equipment costing $342,000 this year.Also this year,the company sold for $70,000 cash,equipment that originally cost $230,000 five years ago.How should these transactions be listed in the statement of cash flows?

Question

Quizplus · Accepted Answer

The purchases and sales of equipment should be shown separately in the statement of cash flows. The purchase of equipment for $342,000 is a cash outflow and should be shown as a decrease to cash. The sale of equipment for $70,000 is a cash inflow and should be shown as an increase to cash. So, the correct option is to show a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale) in the statement of cash flows. Therefore, the answer is D.