KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a $215,000 note payable.
-How would this transaction be reported within the cash flow from financing activities section of the cash flow statement?

Question

KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a $215,000 note payable. 
-How would this transaction be reported within the cash flow from financing activities section of the cash flow statement?

Quizplus · Accepted Answer

The transaction involves acquiring a machine through a down payment and a note payable, which affects investing and financing activities respectively. However, the cash flow from financing activities only includes the inflows and outflows of cash related to borrowing and repaying debts, issuing and buying back shares, and paying dividends. Since the note payable represents a non-cash financing activity, it does not directly affect the cash flows and thus is not reported in the cash flow from financing activities section. The cash paid ($35,000) is related to the purchase of the machine, which is an investing activity, not a financing activity.

KAJ Incorporated Purchased a Machine Costing $250,000 by Paying $35,000