On the statement of cash flows, the issuance of capital stock for cash to be used for future expansion of a production facility is treated as a/an
A)investing activity.
B)financing activity.
C)operating activity.
D)exchange transaction.
E)funds flow activity.

Question

Quizplus · Accepted Answer

The issuance of capital stock for cash is a financing activity because it represents a transaction to raise funds through external sources for future investment activities, rather than an operation that generates revenue or an investment in assets that generate returns. It is important to note that the use of funds raised through the issuance of stock, such as investing in a new production facility, would be classified as an investing activity.

On the Statement of Cash Flows, the Issuance of Capital