To Go Company is preparing its statement of cash flows using the indirect method

Question

To Go Company is preparing its statement of cash flows using the indirect method. During the year, they purchased equipment for $15,000 cash. Which of the following statements is true?

A.

$15,000 would be shown as a positive cash flow in the investing activities section.

B.

$15,000 would be shown as a positive cash flow in the financing activities section.

C.

$15,000 would be shown as a negative cash flow in the operating activities section.

D.

$15,000 would be shown as a negative cash flow in the investing activities section.

Explanation / Answer

Option D is correct. 15,000 would be shown as a negative cash flow in the investing activities section. Purchase of fixed assets is an outflow in the investing activities category.

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