Question

The City of Tutland issued $10 million, 6 percent, 10-year bonds at 101 to finance refurbishment of its water utility fund equipment. The bond is suance is reported in the water utility enterprise fund statement of cash flows as

a. A cash flow from operating activities.
b. A cash flow from noncapital financing activities.
c. A cash flow from capital and related financing activities.
d. A cash flow from investing activities.

Answer 1

Answer: c. A cash flow from capital and related financing activities

Step-by-step explanation:

It is Cash flow from Capital and financing related activities because first of all, the funds are to be used to refurbish of the Town's water utility fund equipment which is a Capital Expense.

Also it relates to the raising of funds on the capital market which goes into the Finance portion of the Cash Flow statement.

With these considerations in mind, the activity will be recorded as a cash flow from capital and related financing activities.

If you need any clarification do react or comment.

Answer 2

b. A cash Flow from non capital financing activity

Step-by-step explanation:

It is a cash flow from non capital financing activity since no shares have been issued thus option c. is not applicable

The City of Tutland has obtained financing, so it is not cash generated from operating activities.

This transaction is also not an investing activity since this is as source if fund and no long term assets are procured in this transaction