Allen Company bought a new copy machine to be depreciated straight line for three years for use by sales personnel. Where would this purchase be reflected on the Statement of Cash Flows? A. It would be an expense on the income statement so it would be reflected in operating cash flows. B. It would be an addition to cash so it would be reflected in the change in cash. C. It would be an addition to property, plant and equipment so it would be an investing activity. D. None of the above answers is correct.

Question

Business

Sloan

20 January, 15:38

Allen Company bought a new copy machine to be depreciated straight line for three years for use by sales personnel. Where would this purchase be reflected on the Statement of Cash Flows? A. It would be an expense on the income statement so it would be reflected in operating cash flows. B. It would be an addition to cash so it would be reflected in the change in cash. C. It would be an addition to property, plant and equipment so it would be an investing activity. D. None of the above answers is correct.

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Meyer · Answer 1

C.

Explanation:

The Cash Flow Statement is a report that gives the movement of cash during a period under consideration. It gives an idea about the inflow and the outflow of cash from operating, investing and financial activities.

-Operating activities. It referes to the main activities of a business of purchase or sale of goods, providing services, etc.

-Investing activities. It shows the investment a business does in either a property, security or particular asset, etc. In this case, the new copy machine is an asset.

-Financing activities. When a business needs of finance, it looks for various sources like raising funds through shares or debts, etc.