Which of the following items would be classified as an investing activity in a statement of cash flows?Group of answer choicesProceeds from the repayment of related party loans.Payments for businesses.Proceeds from the sale of plant and equipment.All of the items would be classified as investing activities.
Question
Which of the following items would be classified as an investing activity in a statement of cash flows?Group of answer choicesProceeds from the repayment of related party loans.Payments for businesses.Proceeds from the sale of plant and equipment.All of the items would be classified as investing activities.
Solution
The statement of cash flows is divided into three sections: operating activities, investing activities, and financing activities.
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Proceeds from the repayment of related party loans: This is typically classified under financing activities as it pertains to transactions with owners and creditors.
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Payments for businesses: This would be classified under investing activities as it involves the purchase of a business, which is a long-term investment.
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Proceeds from the sale of plant and equipment: This would also be classified under investing activities as it involves the disposal of long-term assets.
So, out of the given options, "Payments for businesses" and "Proceeds from the sale of plant and equipment" would be classified as investing activities in a statement of cash flows. Therefore, the statement "All of the items would be classified as investing activities" is incorrect.
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