Information from the company\'s financial records is presented below At the end
ID: 2469431 • Letter: I
Question
Information from the company's financial records is presented below At the end of 2014, the company issued notes at par value for S 1.200.060 cash. The proceeds were used to retire the S 1,000,000 note issue outstanding at the end of 2013 (before their maturity date). All interest expense was paid in cash during 2014. Refer to Medstar Ambulance Sendee. The following statements describe how the company reported the cash flow effects of the items described above on its 2014 statement of cash flows. The indirect method is used to prepare the operating activities section. Which of the following has been reported incorrectly? The loss on note retirement of $45,000 was added to net income in the operating activities section. Payments of $1, 260,000 were reported as a cash outflow in the investing activities section. Interest expense of $75,000 was not reported separately because it is included in. the operating activates section. Proceeds of $1, 200,000 from the issuance of notes were reported as a cash inflow in the financing activities section.Explanation / Answer
Answer B is incorrect.
Payment of $1,260,000 were reported as a cashflow in the investing activities section. Repayment or issuing of note payable are the part of financing activities so they won't be included in investing activites.
In the question , none of these transaction relates to Investing activities section. In Investing activities, all the cash flow related to investment in capital assets are entered such as Purcahse of assets, sale of asset etc.
And in the question, either the transaction relates to Financing activities or operating activities.