During 2015,Gillespie Corporation made a loan of $155,000 to a major customer.By the end of 2015 the customer had paid back $60,000 of the loan plus interest of $12,000.In the statement of cash flows for 2015,Gillespie Corporation would report:
A)A net decrease in cash and cash equivalents of $72,000 for 2015.
B)$72,000 net cash used for investing activities.
C)$95,000 net cash used for investing activities,and $12,000 cash provided from operating activities.
D)$155,000 net cash used for investing activities,$60,000 net cash provided by financing activities,and $12,000 cash provided by operating activities.

Question

Quizplus · Accepted Answer

The loan of $155,000 made by Gillespie Corporation to a major customer is an investing activity. The customer's repayment of $60,000 plus $12,000 interest is a cash inflow from operating activities. Therefore, the net cash used for investing activities is $155,000 - ($60,000 + $12,000) = $83,000. This means that the statement of cash flows for 2015 would report $95,000 net cash used for investing activities ($83,000 + $12,000), and $12,000 cash provided from operating activities. Option A is incorrect because the statement does not show a net decrease in cash and cash equivalents for 2015. Option B and D are incorrect because they overstate the amount of net cash used in investing activities.

During 2015,Gillespie Corporation Made a Loan of $155,000 to a Major