The following item is classified as a 'financing activity' in the Statement of Cash Flows:
A)interest paid on debentures
B)cash received from accounts receivable
C)cash payment on redemption of the company's debentures
D)cash payment to purchase debentures of another entity.

Question

Quizplus · Accepted Answer

The cash payment on redemption of the company's debentures is a financing activity because it involves the company reducing its debt through the repayment of its own debentures. Option A is an operating activity because it relates to the cost of financing incurred during the period. Option B is an operating activity as it involves the inflow of cash from customers for the goods or services sold. Option D is an investing activity because it relates to the purchase of long-term investments in the form of debentures of another entity.

The Following Item Is Classified as a 'Financing Activity' in the Statement