When Equipment Is Purchased Entirely Through a Loan

question 115

Multiple Choice

When equipment is purchased entirely through a loan:

• A)The equipment is shown as an increase in the investing activities section.
• B)The equipment is shown as a decrease in the investing activities section.
• C)The loan is shown as an increase in the financing section.
• D)Neither the loan nor the purchase of equipment is shown in the investing or the financing sections.

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Definitions:

Structured Entity

A financial entity designed to segregate certain risks, assets, or activities, often used in complex financial structures to achieve specific objectives.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project.

Associated Company

A firm in which another company owns a significant stake but not a controlling interest, usually between 20% and 50% of the voting shares.

Board of Directors

A group of individuals elected by shareholders to oversee the management and governance of a corporation.