Question

The repayment of the principal of a loan which had been used to finance the purchase of equipment should be reported on the statement of cash flows as a:

Multiple Choice

A) cash outflow from investing activities.


B) cash outflow from operating activities.


C) cash outflow from financing activities.


D) noncash investing and financing activities in a supplemental disclosure.

Answer 1

The repayment of a loan's principal, when used to finance equipment purchase, is reported on the statement of cash flows as a cash outflow from financing activities.

Step-by-step explanation:

The repayment of the principal of a loan used for financing the purchase of equipment should be reported on the statement of cash flows as a cash outflow from financing activities. This is because the repayment of loans falls under the financing activities category, which includes transactions involving debt, equity, and dividends. When a company repays the principal on a loan, it reflects the company's cash flow management related to financing its operations and capital requirements.