Question

Consider the purchase of equipment for cash. If the equipment is used in the day-to-day operations...

  1. Consider the purchase of equipment for cash. If the equipment is used in the day-to-day operations over its entire 5-year useful life the cash outlay for the purchase is classified as a cash outflow from a financing activity.

    True

    False

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Answer #1

Consider the purchase of equipment for cash. If the equipment is used in the day-to-day operations over its entire 5-year useful life the cash outlay for the purchase is classified as a cash outflow from a financing activity.

The given statement is False.

When a long term asset is purchased for day to day use in the business operations, it is considered as an investing activity.

Financing activities include activities related to issue and retirement of common stock and bonds, raising funds through note payable.

Kindly comment if you need further assistance.

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