Avatar Company uses the direct method to prepare its cash flow statement.Please refer to the following information:
• Repayments on long-term bills payable: $40 000
• New borrowing on long-term bills payable: $34 000
Which of the following statements is accurate regarding the cash flow statement?

Question

Avatar Company uses the direct method to prepare its cash flow statement.Please refer to the following information:
 • Repayments on long-term bills payable: $40 000
• New borrowing on long-term bills payable: $34 000
Which of the following statements is accurate regarding the cash flow statement?

Quizplus · Accepted Answer

Repayments on long-term bills payable are considered cash outflows (negative) and new borrowing on long-term bills payable is considered cash inflows (positive) in the financing section. Therefore, $40 000 will be shown as a negative cash flow and $34 000 will be shown as a positive cash flow in the financing section of the cash flow statement. Option D correctly identifies this as the case.

Avatar Company Uses the Direct Method to Prepare Its Cash