The Purchase of Non-Current Assets by Issuing a Note Payable

question 78

Multiple Choice

The purchase of non-current assets by issuing a note payable is reported on the statement of cash flows in the:

• A) Notes to the statement of cash flows.
• B) Investing section.
• C) Operating section.
• D) Financing section.
• E) Both financing and investing sections.

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Definitions:

Interest Tax Shield

The reduction in income taxes that results from taking the allowable interest expense deductions from taxable income.

Financial Distress Costs

Expenses incurred by a firm facing financial difficulties, including legal, administrative, and potentially bankruptcy-related costs.

Reorganization

Financial restructuring of a failing firm to attempt to continue operations as a going concern.

Going Concern

An assumption that a company will continue to operate in the foreseeable future, without the intention or necessity of liquidation.