Martin Ceramics Company is preparing its statement of cash flows using the indirect method.During the year,they purchased equipment for $15,000 cash.Which of the following statements is true?

Question

Quizplus · Accepted Answer

The purchase of equipment is a cash outflow related to investing activities, so $15,000 would be shown as a negative cash flow in the investing activities section of the statement of cash flows prepared using the indirect method. Option A is incorrect because the purchase of equipment is not an operating activity. Option C is incorrect because $15,000 is a cash outflow, and cash outflows are always negative values in the statement of cash flows. Option D is incorrect because financing activities relate to cash inflows and outflows related to owners and creditors, such as issuing stock or paying dividends or loans, so the purchase of equipment doesn't fall under this category.

Martin Ceramics Company Is Preparing Its Statement of Cash Flows