Which of the following transactions would least likely be reported in the cash flow statement as investing cash flows? A) Purchase of real estate with cash borrowed from a bank. B) Sale of held-to-maturity securities for cash. C) Principal payments received from loans made to others. D) Purchase of plant and equipment used in the manufacturing process with financing provided by the seller. Answer is D) agreed, the issue i have is…the principal payment recieved is considered CFI according to the question, that’s wrong is it not? Surely the principle is from CFF
Again the loan made to other is a financial asset under Loans and Receivables. Any money lent to others should be considered as an investing activity and the principal repayments considered similarly as selling a PPE.
So the answer is C. Read the question – what has tripped you up is “Least Likely” in the question, which you have missed. Principle payment is a CFF - so it is LEAST LIKELY to be included in the CFI.
CPK–Are you sure about that? C states the payment received on loan to others. It didn’t raise a loan, it was the other way round and therefore an investment. So the answer should be D. Cheers Sumo
Ok. I did not read the question fully. (and missed the part that the answer had been provided). Sorry.
Thanks guys, that’s one down, just that other issue with the Bonds amortization …CFO or CFF? I know the coupon is CFO but they state amortization of prem or discount is CFF? True or False : /