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:

Capital Expenditures Budget

The Capital Expenditures Budget is a plan for the funds to be spent on long-term assets that will have a useful life beyond the current fiscal year, such as buildings, equipment, or vehicles.

Plant Assets

Long-term tangible assets used in the operation of a business that are not intended for resale.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, often used to manage liquidity.

Capital Expenditures Budget

A plan that details a company's projected spending on long-term assets, such as property, plant, and equipment, which are expected to provide benefits over multiple years.