Which of the following events will appear in the cash flows from financing activities section of...

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?

Cash purchases of bonds issued by another company.

Cash received as repayment for funds loaned.

Cash purchase of treasury stock.

Cash purchases of equipment

Solutions

Expert Solution

Answer)

S. No.	Event	Classification	Remarks
1	Cash Purchases of Bonds Issued by Another Company	Cash Flow from INVESTING activity section	Since bonds are purchased and investment is made, it will be classified under Cash flow from INVESTING activity section
2	Cash received as repayment for funds loaned	Cash Flow from INVESTING activity section	When amount was loaned it was an investment and when its received balance in cash it will be classified under Cash flow from INVESTING activity section
3	Cash Purchases of Treasury Stock	Cash Flow from FINANCING activity section	When Stocks are issued funds are raised by the company and thus it would fall under FINANCING activity. Similarly, if cash is paid for purchase of own stock by the company (i.e. Treasury Stock), it will be classified under Cash flow from FINANCING activity section
4	Cash Purchases of Equipment	Cash Flow from INVESTING activity section	Cash is paid for purchase of Equipment which is an investment on equipment, it will be classified under Cash flow from INVESTING activity section

Thus the correct answer for cash flows from FINANCING activities section is: Cash purchases of Treasury Stock.

ekkarill92 answered 1 year ago

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