When the Indirect Method Is Used to Determine Operating Cash

question 189

Multiple Choice

When the indirect method is used to determine operating cash flows,how is the purchase of equipment for cash shown on the statement of cash flows?

• A) as an operating activity
• B) as an investing activity
• C) as a financing activity
• D) as a noncash investing and financing activity

---

Definitions:

Annuity Payment

This refers to the regular disbursement from an annuity investment, typically made on a monthly, quarterly, or yearly basis.

Amortized Loan

A loan with scheduled periodic payments that include both interest and principal repayment, ultimately paying off the loan by its maturity date.

Monthly Payment

This refers to the fixed amount of money paid by a borrower to a lender at regular monthly intervals, typically used in the context of loans or mortgages.

EAR

Effective Annual Rate, a comprehensive calculation of interest on a loan or investment, considering the effect of compounding.