The Sonesta Company uses the indirect method for the statement of cash flows. In 2013, they purchased equipment for $10,000 cash. Which of the following statements is TRUE?
A) $10,000 would be shown as a negative cash flow in the operating activities section.
B) $10,000 would be shown as a negative cash flow in the investing activities section.
C) $10,000 would be shown as a positive cash flow in the investing activities section.
D) $10,000 would be shown as a positive cash flow in the financing activities section.

Question

Quizplus · Accepted Answer

The purchase of equipment is classified as an investing activity in the statement of cash flows under the indirect method. It would be shown as a negative cash flow because cash went out of the company. Therefore, option B is the correct answer.

The Sonesta Company Uses the Indirect Method for the Statement