Question

multiple choice question

the sale of its intangible asset, trademark, is considered a(n) _______

• investing activity because the purchase and sale of assets that benefit the company for more than one year are classified as such
• financing activity because the sale provides funds that can be used in the business
• operating activity because the gain or loss that is generated by the sale of the trademark is included in net income

Explanation:

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<reasoning>

Identify the transaction type

Using the Statement of Cash Flows knowledge point

• The transaction involves the sale of a trademark, which is an intangible asset.
• Long-term assets, including both tangible (property, plant, and equipment) and intangible assets (trademarks, patents, goodwill), are resources that benefit the company for more than one year.

Classify the cash flow activity

Using the Statement of Cash Flows knowledge point

• Cash flows from purchasing and selling long-term productive assets are classified as investing activities.
• Therefore, the sale of a trademark is an investing activity because the purchase and sale of assets that benefit the company for more than one year are classified as such.

</reasoning>

<answer>
<mcq-correct>(A) investing activity because the purchase and sale of assets that benefit the company for more than one year are classified as such</mcq-correct>
<mcq-option>(B) financing activity because the sale provides funds that can be used in the business</mcq-option>
<mcq-option>(C) operating activity because the gain or loss that is generated by the sale of the trademark is included in net income</mcq-option>
</answer>

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Answer:

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<reasoning>

Identify the transaction type

Using the Statement of Cash Flows knowledge point

• The transaction involves the sale of a trademark, which is an intangible asset.
• Long-term assets, including both tangible (property, plant, and equipment) and intangible assets (trademarks, patents, goodwill), are resources that benefit the company for more than one year.

Classify the cash flow activity

Using the Statement of Cash Flows knowledge point

• Cash flows from purchasing and selling long-term productive assets are classified as investing activities.
• Therefore, the sale of a trademark is an investing activity because the purchase and sale of assets that benefit the company for more than one year are classified as such.

</reasoning>

<answer>
<mcq-correct>(A) investing activity because the purchase and sale of assets that benefit the company for more than one year are classified as such</mcq-correct>
<mcq-option>(B) financing activity because the sale provides funds that can be used in the business</mcq-option>
<mcq-option>(C) operating activity because the gain or loss that is generated by the sale of the trademark is included in net income</mcq-option>
</answer>

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