Question

Which of the following is NOT an example of a transaction that would appear in the financing section of the statement of cash flows?

Select one:

a. Selling shares of common stock

b. None of the above

c. Payment of interest expense on note

d. Repayment of principal amount of long-term note

e. Purchasing treasury stock

Answer 1

Option (C) is correct. Payment of interest expense on note is not an example of transaction that would appear in the financing section of the statement of cash flows because it is a part of net income and included in the foot notes of the cash flow statements, not in the financing section.

Option (A) is not correct. Because selling shares of common stock is included in financing activities as the transaction involved shareholders equity and increase cash by selling shares of common stock.

Option (B) is not correct.

Option (D) is not correct. Repayment of principal amount is included in financing activities because it increases cash flow in balance sheet when it is received from the loan so the amount is included in the financing activities of cash flow.

Option (E) is not correct. Because purchasing treasury stock includes in financing activities, as financing activities include changes in shareholders equity and long term liability. Purchase treasury stock will cause a decrease in cash in financing activities.