During the current year, a firm made one principal payment on each of the follow
ID: 2576525 • Letter: D
Question
During the current year, a firm made one principal payment on each of the following 4 loans. All 4 borrowings occurred in the current year. ___ 1. Six-month loan from financial institution; loan proceeds were used to purchase merchandise inventory. ___ 2. Three-year loan from financial institution; loan proceeds were used to purchase inventory. ___ 3. Six-month loan from financial institution; loan proceeds were used to purchase plant assets. ___ 4. Three-year loan from financial institution; loan proceeds were used to purchase plant assets. ____ How many of the 4 principal payments are classified as financing cash flows (F)?
a. 0
b. 1
c. 2
d. 3
e. 4
a. 0
b. 1
c. 2
d. 3
e. 4
Explanation / Answer
Principal payments on all of the four loans are calssified as cash outflows from finaincing activities as principal payments on loan are classified under financing activities in the statement of cash flows.
The answer is e.
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