On January 1,2011,Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information.The computer has a 5-year useful life,after which it will be worthless because it will be obsolete.What should Ace Electronics report on its Statement of Cash Flows for the year ended December 31,2011?

Question

Quizplus · Accepted Answer

The purchase of a long-term asset, such as a computer for accounting purposes, is classified as an investing activity. Therefore, Ace Electronics should report $(400,000) as cash paid for investing activities on its Statement of Cash Flows for the year ended December 31, 2011. Depreciation is a non-cash expense and does not appear on the Statement of Cash Flows.

On January 1,2011,Ace Electronics Paid $400,000 Cash for a Computer