On September 14th, 20x8, Mario Ltd. purchased equipment costing $46952. The comp

Question

On September 14th, 20x8, Mario Ltd. purchased equipment costing $46952. The company paid a portion in cash and signed a note payable for the remaining amount. Mario Ltd. also purchased a building costing $304910. For the building the company paid $104153 cash and issued common shares for the remaining amount. Notes Payable had a balance of $44583 on the 20x7 financial statements and $63702 on the 20x8 statements. How would these transactions be reflected in the cash flow statement? Select one: O a. Investing outflow of $104153 and a financing outflow of $ 200757 O b. Investing outflow of $ 131986 and a financing outflow of $o O c. Investing outflow of $131986 and a financing outflow of $ 219876 O d. Investing outflow of $ 351862 and a financing outflow of so Check

Explanation / Answer

Option - B ............ is the correct choice

Explanation

When notes and common stock were issued for consideration other than cash, they are not reflected in the cashflow statement. Hence cash flow from financing activities is 0 (zero).

Investing activities, we consider assets acquired by payment of cash.

Buildings .......... cash paid = 104,153 ( directly given)

Equipment ....... cash paid = 46952 - 19119 = 27833

Here difference in notes payable between 2017 and 2018 represents notes issued for acquiring equipment

Thus total of Investing activities to be shown in cash flow = 104153 + 27833 = 131986

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