Question

Equipment is acquired by issuing a note payable for $50,000 and making a down payment of $20,000. The statement of cash flows will report a:

a) $20,000 outflow in the operating activities section
b) $50,000 inflow in the financing activities section
c) $20,000 outflow in the investing activities section
d) $70,000 outflow in the investing activities section

Answer 1

The statement of cash flows will report a $20,000 outflow in the investing activities section when equipment is acquired by issuing a note payable and making a down payment.

Step-by-step explanation:

The statement of cash flows will report a $20,000 outflow in the investing activities section. When equipment is acquired, it is considered an investing activity, as it involves the purchase of long-term assets that will provide future benefits.

The down payment of $20,000 is considered an outflow because it represents cash leaving the company to acquire the equipment.