When a Company Borrows $150 Million During the Year and Also

question 54

True/False

When a company borrows $150 million during the year and also repays $120 million of debt, the company can disclose the $30 million net amount as excess of borrowings over repayments in the financing activities section of the statement of cash flows.

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Definitions:

Journal Entry

A record in accounting that logs every financial transaction of a business in double-entry bookkeeping.

Interest Expense

Interest expense is the cost incurred by an entity for borrowed funds, typically presented as a line item on the income statement.

Fixed Expense

Fixed expense refers to costs that do not fluctuate with the level of goods or services produced by the business, such as rent, salaries, and insurance.

Borrowing Risk

The potential danger that borrowers might not be able to repay their loans or meet other financial obligations, leading to financial loss for the lender.