Tornado Manufacturing Inc. builds cleaning equipment. On January 1, 2011, manage
ID: 2435061 • Letter: T
Question
Tornado Manufacturing Inc. builds cleaning equipment. On January 1, 2011, management at Tornado determines that it will need to replace some machinery four years from now [on December 31, 2014], and which it estimates will cost $160,000 on that date. Management decides to have $160,000 available on December 31, 2014 by making 4 equal annual deposits into a fund at its bank each December 31. It is estimated that the interest rate the deposits will earn is 7% compounded annually.Assume that each annual deposit to be made is $35,000 [if you want to calculate it for practice, please do so; the correct amount is $36,037].
With respect to the deposit made on December 31, 2011 [e.g. $35,000], where will this amount appear on the statement of cash flows?
A. investing activities
B. operating activities
C. financing activities
D. footnote disclosure only
Explanation / Answer
With respect to the deposit made on December 31, 2011 [e.g. $35,000], where will this amount appear on the statement of cash flows? A. investing activities