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) not recorded on the statement of cash flows

Question

Quizplus · Accepted Answer

The cost of acquiring another company, including the cost of acquiring patents, is considered an investment activity and therefore will be recorded as an outflow under investment activities on the statement of cash flows.

A Software Company Acquires a Smaller Company in Order to Acquire