Strawbale, Inc. purchases a $600,000 building, paying $400,000 in cash and signi
ID: 2395158 • Letter: S
Question
Strawbale, Inc. purchases a $600,000 building, paying $400,000 in cash and signing a $200,000 promissory note. What will be reported on the statement of cash flows as a result of this transaction?
Multiple Choice
A $600,000 cash outflow from investing activities
A $400,000 cash outflow from investing activities and a $200,000 cash inflow from financing activities
A $400,000 cash outflow from investing activities and a $200,000 noncash transaction
A $600,000 cash outflow from investing activities and a $200,000 cash inflow from financing activities
Explanation / Answer
Solution:
The transaction results $400,000 cash outflow from investing activities and a $200,000 noncash transaction.
Because, $400,000 cash paid for purchase of building which is an outflow of cash and the remaining amount (i.e.$200,000) was settled through the non cash payment by signing a promissory note (i.e. settled the remaining amount by taking the loan on a promissory note)