A company provided a loan of $1,000,000 with interest at 7% to another company. The interest revenue from this loan would be reported on the statement of cash flows as a:Multiple Choicecash inflow from operating activities.cash inflow from investing activities.cash inflow from financing activities.noncash investing and/or financing activity.
Question
A company provided a loan of $1,000,000 with interest at 7% to another company. The interest revenue from this loan would be reported on the statement of cash flows as a:Multiple Choicecash inflow from operating activities.cash inflow from investing activities.cash inflow from financing activities.noncash investing and/or financing activity.
Solution
The interest revenue from a loan would be reported on the statement of cash flows as a cash inflow from operating activities.
Here's why:
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Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This includes any interest received on loans.
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Investing activities include any sources and uses of cash from a company's investments. A loan given out is considered an investment, but the interest received from it is not.
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Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. This does not include interest received on a loan.
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Noncash investing and financing activities include transactions that do not involve any cash flows, but result in significant changes in the balance sheet. Interest received on a loan does involve a cash flow, so it does not fall under this category.
So, the correct answer is: cash inflow from operating activities.
Similar Questions
The business has a loan of $50,000 and makes interest-only repayments of 1% interest per month. It is the end of the month and they are making their $500 interest payment. Select the flows and accounts that the business would use to record this transaction.
Net Cash Flow to the firm is also considered cash flow coming from _______________.a.Operating activitiesb.Invesying activitiesc.Equity activitiesd.Financing activities
Which of the following would not be classified as a financing activity in a statement of cash flows?Group of answer choicesProceeds from a share issue.Repayment of borrowings.Proceeds from borrowings.Dividends received.
Cash inflows and outflows associated with changes in non-current liabilities and equity, not arising from profit are included in which section of the statement of cash flows?Group of answer choicesNon-current.Operating.Financing.Investing.
Cash outflows from financing activities include:dividends paid to shareholders.the lending of money to another business.payment of income tax.cash paid for the purchase of shares.
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