Question

How would the issuance of a mortgage note in exchange for a building be reported on the statement of cash flows?

A. Noncash finenctng and Investing actvity
B. Investing actvity
C. Operating activity
D. Financng activity

Answer 1

The issuance of a mortgage note in exchange for a building is reported as a Noncash financing and investing activity on the statement of cash flows, noting the importance of this significant investing and financing transaction that does not involve immediate cash flows.

Step-by-step explanation:

The issuance of a mortgage note in exchange for a building would be reported on the statement of cash flows as a Noncash financing and investing activity. This type of transaction does not involve immediate cash flows but does reflect a significant investing and financing transaction. Generally, such noncash transactions are disclosed in a separate schedule at the bottom of the statement of cash flows or in the notes to the financial statements. These activities are important for understanding a firm's financial position, especially since a mortgage involves a legal obligation to make payments over time, and acquiring a building involves investing in long-term assets.

Answer 2

A. Noncash financing and Investing activity

Step-by-step explanation:

The Cash Flow Statement records all Cash related transactions and used to determine the movement in the Balance of Cash and Cash Equivalent. When mortgage note is issued in exchange of a building, this is simply an Exchange of Assets without the movement of cash. Non - Cash activities are not shown in the Cash Flow Statement.