Final answer:
Companies classify proceeds from the issuance of long term bonds on the statement of cash flows under financing activities, reflecting an increase in long-term liabilities and equity due to borrowing from investors.
Step-by-step explanation:
The proceeds received from the issuance of long term bonds by a company are classified on the statement of cash flows under financing activities. This is because the issuing of bonds is a method of raising capital that affects the company's long-term liabilities and equity. When a company issues bonds, it essentially borrows money from investors who become bondholders and are entitled to periodic interest payments. The proceeds from such issuance, which could be in substantial amounts depending on the total number of bonds issued, provide an influx of cash that is recorded as a cash inflow in the financing section of the statement of cash flows.
Proceeds received from the issuance of long-term bonds would be classified as a cash inflow from financing activities on a company's statement of cash flows. This is because issuing bonds is a form of financing, and the cash received from the bond issuance would be considered as a source of funds for the company.