There are a summary of trasactions that asks you to in which you are supposed to
ID: 2434261 • Letter: T
Question
There are a summary of trasactions that asks you to in which you are supposed to enter a tabulation under income and cash flows. You are asked to enter the amounts under each if its positive or negative or enter a zero where appropriate. The transactions i am stuck on are 1 cash borrowed from the local bank for $35,000 (one-year note). 2 small truck purchased at the end of the quarter to be used in the business for two years starting the next quarter: cost $9,500 cash. In the question you are supposed to report these activities based on the first quarter of operationsExplanation / Answer
According to the first transaction cash borrowed from the local bank $35,000(one-year note) is not either an expense or revenue according to the income statement.Borrowing of cash is a liability and not an income.Borrowing will increase the cash balance.Hence,it shold be entered as "zero" under computation of income.As, borrowing results in cash inflow it should be reported as "Positive cash". According to the second transaction that is purchase of small truck at the end of the quarter to be used in the business for 2 years starting the next quarter.Cost $9,500 cash.Purchase of truck is an asset and not an income.it will decrease the cash balance by the acquisition amount. Hence, it should be reported as "zero" under computaion of income and "negative cash" under computation of cash.
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