A debtor of Adams Company owes $500,000 but does not have enough cash to repay the debt. Following lengthy negotiations, the parties agreed that the debtor will issue 200,000 shares of Common Stock to settle the debt. This transaction will be reported in the investing activities section of the statement of cash flows for Adams Company.

Question

Quizplus · Accepted Answer

This transaction would be reported in the financing activities section of the statement of cash flows as it involves the issuance of common stock, which is a financing activity.

A Debtor of Adams Company Owes $500,000 but Does Not