An analysis of changes in selected balance sheet accounts of Johnson Corporation shows the following for the current year:

Plant and Equipment accounts: Debit entries to asset accounts $ 160,000

Credit entries to asset accounts $ 118,000

Debit entries to accumulated depreciation accounts (resulting from sale of plant assets) $ 91,000

Credit entries to accumulated depreciation accounts (representing depreciation for the current year) $ 107,000

Johnson's income statement for the current year includes a $14,000 loss on disposal of plant assets. All payments and proceeds relating to purchase or sale of plant assets were in cash.

How should purchases, sales, and depreciation of plant assets be classified in Johnson's statement of cash flows for the current year? (Assume the direct method is used by Johnson.)

Select one:

a. Purchases of plant assets are classified as investing activities; sales of plant assets are classified as financing activities; depreciation is classified as an operating activity.

b. Purchases of plant assets and depreciation are classified as investing activities; sales of plant assets are classified as financing activities.

c. Purchases and sales of plant assets are classified as investing activities; depreciation does not appear as an operating, financing, or investing activity.

d. Since plant assets are used to generate income from operations, purchases, sales, and depreciation of plant assets are all classified as operating activities.