Selling equipment for cash is reported on the statement of cash flows under which section?

• A. Supplemental disclosures
• B. Financing activities
• C. Operating activities
• D. Investing activities

Answer: (D)

Verified step by step guidance

1. Understand the purpose of the statement of cash flows: It categorizes cash transactions into operating, investing, and financing activities to show how cash is generated and used during a period.
2. Review the definition of investing activities: These include transactions involving the purchase or sale of long-term assets, such as equipment, property, or investments.
3. Recognize that selling equipment for cash is a transaction involving a long-term asset, which aligns with the definition of investing activities.
4. Differentiate this transaction from operating activities (day-to-day business operations) and financing activities (transactions related to borrowing or equity). Selling equipment does not fall under these categories.
5. Conclude that selling equipment for cash is reported under the 'Investing Activities' section of the statement of cash flows, as it involves the disposal of a long-term asset.