Question

Which of the following statements is true?

A. Investment in another company's common stock is classified as a cash outflow from financing activities in the statement of cash flows.
B. Losses on the sale of long-term assets are an adjustment reported in the operating activities section of the statement of cash flows under the indirect method.
C. Dividends paid are classified as a cash outflow from operating activities in the statement of cash flows.
D. Re-payment of long-term debt is classified as a cash outflow from investing activities in the statement of cash flows.

Answer 1

The answer is B.

Step-by-step explanation:

Loss on the sale of long-term assets is an adjustment which will be added back to the net income. This is under the cash flow from operations when preparing cash flow using an indirect method.

Option A is incorrect because investment in another company is under investing activities.

Option C is incorrect because dividend paid are usually under financing activities (cash outflow)

Option D is incorrect because repayment of long term debt is a cash outflow under financing activities.