Question

Assume that Mango Corporation uses the indirect method to depict cash flows. Indicate where, if at all, land and building purchased with cash would be classified on the statement of cash flows?

Answer 1

When using the indirect method for the statement of cash flows, the purchase of land and buildings with cash is classified in the investing activities section as a cash outflow.

Step-by-step explanation:

If Mango Corporation uses the indirect method for its statement of cash flows, purchases of land and buildings with cash would be classified in the investing activities section. This section includes transactions involving the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Since land and building are long-term assets, their purchase with cash would decrease the company's cash flows and would therefore be presented as cash outflows in the investing section of the statement of cash flows.