How should repayment of a long-term loan comprising repayment of the principal amount and interest due to date on the loan be treated in a statement of cash flow?a.The repayment of the principal portion of the loan is a cash flow belonging in the “investing activities” section; the interest payment belongs in the “operating activities” section (because IAS 7 does not permit any alternatives in case of interest payments).b.The repayment of the principal portion of the loan is a cash flow belonging in the “investing activities” section; the interest payment belongs either in the “operating activities” section or the “investing activities” section.c.The repayment of the principal portion of the loan is a cash flow belonging in the “investing activities” section; the interest payment belongs either in the “operating activities” section or the “financing activities” section.d.The repayment of the principal portion of the loan is a cash flow belonging in the “investing activities” section; the interest payment should be netted against interest received on bank deposits, and the net amount of interest should be disclosed in the “operating activities” section.

In relation to long-term financing, an amortised loan involves:Question 2Select one:a.periodic payments principal and interest repaid at maturity.b.periodic interest and principal repayments when positive cash flows begin.c.periodic interest payments and principal repaid at maturity.d.periodic equal repayments of interest and principal throughout the term.

Which of these could not be classified as an operating activity in a statement of cash flows?Correct Answer  Loan repayments.   Payment of interest expense. You Answered  Cash received as payment for the sale of goods on credit in the previous year.   Cash dividends received.

Suppose that a firm has borrowed $510,000 in the current year at 7.5% interest rate, with acommitment to repay the loan (principal and interest) in equal annual instalments over thefollowing 7 years. Calculate:a) The amount of the annual principal repaymentb) The stream of interest paymentsc) The stream of total annual repayments

Identify a true statement about long-term loans.Multiple choice question.The debt incurred is usually repaid according to a floating interest rather than a fixed interest.These loans can make funds available for up to two years.The principal can sometimes start being repaid in the second or third year of the loan, with only interest paid the first year.These loans are often used for seasonal financing and for building up inventories.

The repayment of a note payable is classified in the statement of cash flows as a(n):Multiple ChoiceNoncash activity.Financing activity.Operating activity.Investing activity.