Final answer:
The transaction that would be considered an investing activity is the sale of equipment at book value. This is because investing activities include changes in long-term assets such as equipment. The correct answer is option a.
Step-by-step explanation:
In preparing a statement of cash flows, identifying transactions that belong to operating, investing, or financing activities is crucial for an accurate representation of a company's cash movement. Among the options provided, the sale of equipment at book value is the transaction considered an investing activity. Investing activities in a statement of cash flows relate to the purchase and sale of long-term assets and investments that are not considered cash equivalents. This might include the sale or purchase of property, plant, and equipment (PPE), investments in securities, or loans made to suppliers or received from customers.
Other options such as the sale of merchandise on credit fall under operating activities because they are part of the company’s primary operations. The declaration of a cash dividend is classified under financing activities, as it involves the payment of cash to shareholders. Issuance of bonds payable, even at a discount, is also considered a financing activity as it deals with raising capital through borrowing.
In the case of the sale of equipment at book value, if there is no gain or loss on the sale, the entire cash received would be reported in the investing section. If there is a gain or loss, only the cash received minus any gain or plus any loss is reported in the investing activities. Thus, for the question at hand, the correct option is the sale of equipment at book value.