Baltimore Company had a long-term debt of $1,000,000. To extinguish this debt the company issued $1,000,000 of fully paid shares to the lender. This transaction would have the following impact on the cash flow statement:
A) no impact.
B) increase cash by $1,000,000.
C) increase cash flow from financing activities by $1,000,000.
D) decrease cash by $1,000,000.

Question

Quizplus · Accepted Answer

The transaction involves exchanging shares for debt, not involving cash movement, thus no impact on the cash flow statement.

Baltimore Company Had a Long-Term Debt of $1,000,000