A company purchases a $306700 building, paying $206.000 in cash and signing a $1

Question

A company purchases a $306700 building, paying $206.000 in cash and signing a $100700 promissory note What will be reported on the statement of cash flows as a result of this transaction? O A $206.000 cash outlow from investing activites and a $100.700 cash Inflow from financing activities O A $306700 cash outfiow from investing activities. O A $306700 cash outlow rom investing actvines and a s100700 cash inflow from financing activties O A $206000 cash outflow trom investing activites and a $100.700 noncash transaction Type here to search

Explanation / Answer

Here promissory note means notes payable.

Explanation:

When a business takes on a new loan or note, it increases the notes payable account on the balance sheet. This boosts its cash flow because it received money from the loan. A business reports this amount as a cash inflow in the financing activities section of the cash flow statement. For example, if your small business increases notes payable by $10,000 after obtaining a new loan, you would report a $10,000 cash inflow in the financing activities section of the cash flow statement, which raises total cash flow by $10,000.

So,the answer is option 1 i.e A $206000 cash outflow from investing activities and a $100700 cash inflow from financing activities.

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