Allen Company Bought a New Copy Machine to Be Depreciated

question 45

Multiple Choice

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 property,plant and equipment,so it would be an investing activity.
• C)It would be an addition to cash,so would be reflected in the change in cash.
• D)It would be an increase in borrowing,so would be reflected in financing activities.
• E)It would be a change in inventory,so would be reflected in operating activities.

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Definitions:

Liquidation Transactions

Transactions that occur when a company is in the process of closing and its assets are being sold off.

Capital Distributions

Capital distributions are payments made by a corporation to its shareholders from its capital base, as opposed to payments made from earnings or profit.

Liquidation Expenses

Costs associated with disbanding a company or partnership, including selling off assets, paying off creditors, and distributing any remaining assets to shareholders or partners.

Deficit Capital Account

A situation where a company's capital account balance is negative, indicating that liabilities exceed assets.