A company reports the purchase of equipment for $1,000,000 in cash.On a statement of cash flows,this is a(n)example of:
A)cash outflow from financing activity.
B)cash outflow from operating activity.
C)cash outflow from investing activity.
D)noncash activity.

Question

Quizplus · Accepted Answer

The purchase of equipment represents an investment in a long-term asset and is therefore classified as a cash outflow from investing activities on the statement of cash flows. It is not a cash outflow from financing activities because it does not involve the raising or repayment of capital, and it is not a cash outflow from operating activities because it is not a part of the day-to-day operations of the business. Additionally, since the purchase was made in cash (rather than through debt or other non-cash means), it does not qualify as a noncash activity.

A Company Reports the Purchase of Equipment for $1,000,000 in Cash.On