The Purchase of Long-Term Assets by Issuing a Note Payable

question 130

Multiple Choice

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

• A) Operating activities.
• B) Financing activities.
• C) Investing activities.
• D) Schedule of noncash financing and investing activities.
• E) Reconciliation of cash balance.

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Definitions:

Business Combination

A business making an investment in another business by acquiring a controlling share, often greater than 50%, of the outstanding voting stock of another corporation by paying cash or exchanging stock.

Accrued Interest

Interest that has been incurred but not yet paid, reflecting the cost of borrowing or the earnings from lending money over a specific period.

Semiannual Interest

Interest on a loan or investment calculated and paid twice a year, typically at a fixed rate.

Parent Company

A parent company is a corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.