A company's balance sheet shows the account,Notes Payable.This resulted from a loan made by the company's bank.If the end-of-year balance in the Notes Payable account exceeds the beginning-of-year balance by $5,000,this is shown on the cash flow statement as an
A)inflow of cash of $5,000 in the Operating Activities category.
B)outflow of cash of $5,000 in the Operating Activities category.
C)inflow of cash of $5,000 in the Financing Activities category.
D)outflow of cash of $5,000 in the Financing Activities category.

Question

Quizplus · Accepted Answer

An increase in Notes Payable indicates that the company borrowed more money during the year, which results in an inflow of cash. Since this is considered financing activity, the correct answer is an inflow of cash of $5,000 in the Financing Activities category.

A Company's Balance Sheet Shows the Account,Notes Payable