During 2011, Lewis Corp. acquired buildings for $325,000, paying $75,000 cash and signing a 10% mortgage note payable in 10 years for the balance. How should the transaction be shown in the cash flow statement for Lewis in 2011?
A) As a $325,000 reduction in cash flows from investing activities and a $250,000 increase in cash flows from financing activities
B) As a $325,000 reduction in cash flows from investing activities
C) As a $75,000 reduction in cash flows from investing activities
D) As a $250,000 increase in cash flows from financing activities

Question

Quizplus · Accepted Answer

The cash flow statement should show the actual cash paid for the acquisition, which is $75,000, as a reduction in cash flows from investing activities. The mortgage note does not involve an immediate cash flow.