Alta Pass Brewing Company Purchased Additional Equipment for $120,000

question 3

Multiple Choice

Alta Pass Brewing Company purchased additional equipment for $120,000. Alta Pass paid $25,000 in cash and signed a note for the balance. Alta Pass debited Equipment, credited Cash and

• A) nothing further must be done.
• B) debited the Capital account for $120,000.
• C) credited another asset account for $95,000.
• D) credited a liability account for $95,000.

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Definitions:

Operating Activities

The day-to-day actions that a business undertakes to generate revenue, as reflected in the cash flow statement.

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Indirect Method

A way of calculating cash flows for operating activities in the cash flow statement by adjusting net income for changes in non-cash items.

Operating Activities

Operating activities involve the day-to-day functions of a business directly related to its provision of goods and services.