Sonesta Company owed one of its creditors $250,000, but did not have enough cash to repay the debt. Following lengthy negotiations, the parties agreed that Sonesta would issue 100,000 shares of common stock to settle the debt. This transaction would be reported in the financing section of the statement of cash flows.

Question

Quizplus · Accepted Answer

This transaction does not involve cash flows and would not be reported in the financing section of the statement of cash flows. It is a non-cash financing activity and would be disclosed in a separate schedule or note to the financial statements.

Sonesta Company Owed One of Its Creditors $250,000, but Did