The cash received from the sale of factory equipment no longer in use would be reported in the cash flow statement as an:

• A. Operating Activity
• B. Investing Activity
• C. Financing Activity
• D. None of the Above

Answer: (B)

Verified step by step guidance

1. Understand the categories of cash flows: Operating, Investing, and Financing Activities. Operating activities involve the core business operations, investing activities involve the purchase and sale of long-term assets, and financing activities involve transactions with the company's owners or creditors.
2. Identify the nature of the transaction: The sale of factory equipment is related to long-term assets, which are typically classified under investing activities.
3. Determine the cash flow classification: Since the transaction involves the sale of a long-term asset (factory equipment), it should be classified as an investing activity in the cash flow statement.
4. Consider the impact on the cash flow statement: The cash received from the sale will be recorded as an inflow under the investing activities section.
5. Review the options provided: Confirm that the correct classification for the cash received from the sale of factory equipment is 'Investing Activity', as it involves the disposal of a long-term asset.