An Analysis of Changes in Selected Statement of Financial Position

question 30

Multiple Choice

An analysis of changes in selected statement of financial position accounts of Hierarchy Corporation shows the following for the current year:
$\begin{array} { | c | l | } \hline \text { Property, Plant, and Equipment accounts: } & \\\hline \text { Debit entries to asset accounts } & \$ 504,000 \\\hline \text { Credit entries to asset accounts } & \$ 768,000 \\\hline \begin{array} { c } \text { Debit entries to accumulated depreciation accounts } \\\text { (resulting from sale of PPE assets) }\end{array} & \$ 72,000 \\\hline \begin{array} { c } \text { Credit entries to accumulated depreciation accounts } \\\text { (representing depreciation for the current year) }\end{array} & \$ 192,000 \\\hline\end{array}$ Hierarchy's income statement for the current year includes a $9,600 gain on disposal of property, plant, and equipment. All payments and proceeds relating to purchase or sale of property, plant, and equipment were in cash.

-How should purchases, sales, and depreciation of property, plant, and equipment be classified in Hierarchy's statement of cash flows for the current year? (Assume the direct method is used in Hierarchy.)

• A) Purchases of property, plant, and equipment are classified as operating activities; sales of property, plant, and equipment are classified as financing activities; depreciation is classified as an operating activity.
• B) Purchases of property, plant, and equipment and depreciation are classified as investing activities; sales of property, plant, and equipment are classified as operating activities.
• C) Purchases and sales of property, plant, and equipment are classified as investing activities; depreciation does not appear as an operating, financing, or investing activity.
• D) Since property, plant, and equipment are used to generate income from operations, purchases, sales, and depreciation of property, plant, and equipment are all classified as operating activities.

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Definitions:

Hiring Additional Employees

The process of recruiting and adding new staff to an organization's workforce to accommodate growth, fill vacancies, or enhance capabilities.

Growth Percentage

A measure of financial or business expansion, calculated by comparing an increase in size or value over a particular period.

Upward Mobility Rate

The frequency or likelihood with which individuals in an organization or society can ascend to higher social or economic positions.

Promotion Rate

The frequency at which employees are elevated to higher positions within an organization, indicative of career development opportunities.