In a Statement of Cash Flows, Payments to Acquire Debt

question 16

Multiple Choice

In a statement of cash flows, payments to acquire debt instruments of other entities (other than cash equivalents) should be classified as cash outflows for

• A) operating activities.
• B) investing activities.
• C) financing activities.
• D) lending activities.

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Definitions:

Tax Liability

The total amount of taxes owed by an individual, company, or other entity to a taxing authority.

Income Tax Expense

The amount charged against a company's profits due to income taxes, reflecting the cost of complying with jurisdictions' tax laws.

Capital Lease

A lease agreement in which the lessee records the leased asset as if it was purchased with financing, reflecting it on their balance sheet.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.