A company acquires machinery worth . It pays of the amount immediately by cheque and executes a bond for the remaining balance. Determine the net cash impact and the nature of the activity for the Cash Flow Statement:
- AInflow operating activity
- BOutflow Investing activity
- CInflow Investing activity
- DOutflow Investing activity
Solution & Step-by-step Explanation
* The acquisition of a fixed asset (machinery) is an Investing Activity.The total cost is , but only is paid in cash via cheque:
The remaining balance settled by issuing a bond is a non-cash transaction and is excluded from the cash flow statement. Therefore, it results in an Investing Activity Outflow of .
The remaining balance settled by issuing a bond is a non-cash transaction and is excluded from the cash flow statement. Therefore, it results in an Investing Activity Outflow of .