If ABC Inc

Accounting Feb 22, 2021

If ABC Inc. buys a piece of equipment for $50,000, will use it in the business for 5 years and in 5 years expects to sell it for $10,000. What should ABC Inc. show in its cash flow statement in the year of purchase?

Expert Solution

Cash Flow in the year of purchase = $ (50000).

Step-by-step explanation

As the company purchased the equipment, there is a initial outflow of cash which is called Initial Investment and hence there is no inflow in the year of purchase, hence it is to be shown as negative cash flow means cash outflow in the year of purchase. i.e. $ (50000). Cost of equipment.

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