When Using the Direct Method,how Is the Purchase of Equipment

question 74

Multiple Choice

When using the direct method,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

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Definitions:

Process Cost System

An accounting system used to track and allocate costs of production by processes or departments, commonly used in industries where goods are produced in a continuous process.

Advertising Company

A business specializing in creating, planning, and handling advertising and sometimes other forms of promotion for its clients.

Chemical Company

A business entity that specifically focuses on the manufacturing, research, and sale of chemicals and chemical-based products.

ABC Philosophy

Stands for Activity-Based Costing, a philosophy that allocates overhead and indirect costs to specific activities, leading to more accurate product or service costing.