Question

In 2020, Malibu, Inc. issued notes payable to purchase land. In Malibu’s 2020 statement of cash...

In 2020, Malibu, Inc. issued notes payable to purchase land. In Malibu’s 2020 statement of cash flows, how would this transaction be classified?

A.

Cash flows from both investing and financing activities.
B.

Cash flow from investing activity only.
C.

Noncash investing and financing activity.
D.

Cash flow from financing activity only.
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Answer #1

When Malibu INC. Issued note payable it will Increase Note Payable on Balance sheet and result in Boost its Cash flow ,when Malibu INC. issue note payable it will increase Cash under Financing activity, becasue notes payable is financial instrument .

When Malibu INC. Purchase Land from by issuing Note payable it will reduce cash flow and resulting into cash flow from investment activity. Because purchase of land is investment activity.

Therefor Option A is Correct answer Cash flows from both investing and financing activities.

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