Asked by Vitamin Monster on May 08, 2024
Verified
Which of the following would result when a company borrows cash and signs a note payable that is due in two years?
A) A noncurrent liability and an investing cash flow are created.
B) A noncurrent liability and a financing cash flow are created.
C) A current liability and an investing cash flow are created.
D) A current liability and a financing cash flow are created.
Noncurrent Liability
A financial obligation that is not due for settlement within one year of the balance sheet date.
Financing Cash Flow
Cash flow that is related to the company's financing activities, including issuing or buying back shares, dividend payments, and borrowing or repaying debt.
- Comprehend the arrangement of cash activities within the cash flow statement and their repercussion on an enterprise's cash balance.
- Investigate the influence of financing operations on the financial robustness and growth of a corporation.
Verified Answer
AW
Alyce WilliamsMay 10, 2024
Final Answer :
B
Explanation :
When a company borrows cash and signs a note payable that is due in two years, a noncurrent liability and a financing cash flow are created. The liability is classified as noncurrent because it is due after one year from the balance sheet date. The cash flow is classified as financing because it involves raising funds from external sources.
Learning Objectives
- Comprehend the arrangement of cash activities within the cash flow statement and their repercussion on an enterprise's cash balance.
- Investigate the influence of financing operations on the financial robustness and growth of a corporation.