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Equipment rose from $60,000 to $221,000 over the year and none was sold. What is the cash flow for equipment, and in which section?
A$161,000 outflow in financing activities
B$161,000 inflow in investing activities
C$281,000 outflow in investing activities
D$161,000 outflow in investing activities
Answer & Solution
Correct answer: D. $161,000 outflow in investing activities
1. With no disposals, the rise in the asset equals purchases: $221,000 − $60,000 = $161,000.
2. Buying equipment is a cash outflow (Cash credited).
3. It belongs in investing activities.
4. Trap: $281,000 adds the balances instead of taking the difference.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.2.3 "Investing Activities Section", p.274_
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