Glavine Company repaid a bank loan with cash. How should the cash flow from this event be shown on the horizontal financial statements model?

Question

Quizplus · Accepted Answer

Repaying a bank loan is considered a financing activity because it involves the repayment of a liability. The cash flow from this event should be shown as a decrease in cash on the statement of cash flows under the financing activities section. It does not affect the stockholders' equity or net income, and therefore should not be included in the operating activities section. It is also not considered an investing activity because it does not involve the acquisition or disposal of long-term assets.

Glavine Company Repaid a Bank Loan with Cash