If an entity acquires a capital asset and pays for it in full with the issuance of long-term debt, a use of cash will be reported under investing activities and a source of cash of the same amount will be reported under financing activities.

Question

Quizplus · Accepted Answer

The acquisition of a capital asset paid for with long-term debt does not involve an immediate cash transaction, so it is not reported as a use or source of cash in the cash flow statement.

If an Entity Acquires a Capital Asset and Pays for It