Question

Strawbale, incorporated purchases a $306,700 building, paying $206,000 in cash and signing a $100,700 promissory note. what will be reported on the statement of cash flows as a result of this transaction?

O a $206,000 cash outflow from investing activities and a $100,700 noncash transaction
O a $306,700 cash outflow from investing activities
O a $206,000 cash outflow from investing activities and a $100,700 cash inflow from financing activities
O a $306,700 cash outflow from investing activities and a $100,700 cash inflow from financing activities

Answer 1

A $206,000 cash outflow for the cash purchase of a building goes under investing activities, while the $100,700 promissory note is a noncash transaction that does not appear in the cash flow statement but is instead disclosed separately.

Step-by-step explanation:

The $206,000 cash outflow from investing activities and a $100,700 noncash transaction. When Strawbale, Incorporated purchases a building by paying part of it in cash and the rest through a promissory note, the cash payment is recorded in the statement of cash flows under investing activities because the purchase of a building is an investment decision.

The promissory note portion is a financing activity, but since it involves committing to pay the amount in the future and does not represent an immediate cash flow, it is not reported as a cash outflow from financing activities. Instead, it is disclosed in a separate schedule of noncash investing and financing activities attached to the cash flow statement.