Assuming the indirect method for preparing the statement of cash flows is used, indicate whether these items should be added to net income (A), deducted from net income (D), or not be reported in the operating section of the statement under the indirect method (NR).
-Purchase of new factory equipment
A)Added (A)
B)Deducted (D)
C)Not reported (NR)

Question

Quizplus · Accepted Answer

The purchase of new factory equipment is a capital expenditure, which is considered an investing activity, not an operating activity, and therefore is not reported in the operating section of the statement of cash flows under the indirect method.

Assuming the Indirect Method for Preparing the Statement of Cash