Allen Company Bought a New Copy Machine to Be Depreciated

question 72

Multiple Choice

Allen Company bought a new copy machine to be depreciated straight line for three years. Where would this purchase be reflected on the Statement of Cash Flows?

• A)It would be an addition to property, plant and equipment, so it would be an investing activity.
• B)It would be an addition to cash, so would be reflected in the change in cash.
• C)It would be an expense on the income statement, so it would be reflected in operating cash flows.
• D)None of the above options is correct.

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Definitions:

No-par Common Stock

Common stock issued without a par value which means it is not assigned a nominal or face value, but it still represents ownership in a company.

Stated Value

A nominal value assigned to a corporation's stock that bears no relation to its market price, used for calculating capital stock.

Par Preferred Stock

A type of preferred stock that has a nominal face value, which is the amount paid out to shareholders during liquidation before common stockholders.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, usually with dividends that are paid out prior to those to common stockholders.