Which of the following cash transactions is classified as a cash inflow from investing activities on the statement of cash flows?

• A. Sale of equipment for cash
• B. Issuance of common stock for cash
• C. Receipt of cash from customers
• D. Borrowing cash from a bank

Answer: (A)

Verified step by step guidance

1. Understand the classification of cash flows: The statement of cash flows categorizes cash transactions into three main activities: operating, investing, and financing. Investing activities typically involve transactions related to the acquisition or disposal of long-term assets.
2. Analyze the transaction 'Sale of equipment for cash': Selling equipment is considered an investing activity because equipment is a long-term asset. The cash received from the sale represents a cash inflow from investing activities.
3. Evaluate the transaction 'Issuance of common stock for cash': Issuing common stock is a financing activity because it involves raising funds from shareholders to finance the company's operations or growth.
4. Examine the transaction 'Receipt of cash from customers': Receiving cash from customers is an operating activity because it is directly related to the company's primary business operations, such as selling goods or services.
5. Review the transaction 'Borrowing cash from a bank': Borrowing cash from a bank is a financing activity because it involves obtaining funds to finance the company's operations or investments, typically through loans or credit.