How should purchases,sales,and depreciation of plant assets be classified in Hierarchy's statement of cash flows for the current year? (Assume the direct method is used by Hierarchy. )
A)Purchases of plant assets are classified as operating activities;sales of plant assets are classified as financing activities;depreciation is classified as an operating activity.
B)Purchases of plant assets and depreciation are classified as investing activities;sales of plant assets are classified as operating activities.
C)Purchases and sales of plant assets are classified as investing activities;depreciation does not appear as an operating,financing,or investing activity.
D)Since plant assets are used to generate income from operations,purchases,sales,and depreciation of plant assets are all classified as operating activities.

Question

Quizplus · Accepted Answer

Purchases and sales of plant assets are classified as investing activities because they involve the acquisition and disposal of long-term assets, which are investments in the business. Depreciation is a non-cash expense related to the allocation of the cost of tangible assets over their useful lives and does not appear in the statement of cash flows; instead, it is added back to net income in the operating activities section when the indirect method is used, but it does not appear at all when the direct method is used.

How Should Purchases,sales,and Depreciation of Plant Assets Be Classified in Hierarchy's