Examples of transactions that must be disclosed as noncash investing and financing activities include
A)The conversion of debt securities to equity securities
B)The purchase of non-current assets financed by a cash down payment and a note payable to the seller for the balance
C)The leasing of assets in a transaction that qualifies as a finance lease
D)The purchase of noncash assets in exchange for equity or debt securities
E)All of these

Question

Quizplus · Accepted Answer

All of these transactions (A, B, C, and D) involve noncash investing and financing activities and must be disclosed as such. The conversion of debt securities to equity securities (A) represents an exchange of one type of financial instrument for another without the use of cash. The purchase of non-current assets financed by a cash down payment and a note payable (B) involves using both cash and a noncash financial instrument to acquire the asset. The leasing of assets in a finance lease (C) involves the acquisition of an asset without an upfront cash payment, but rather through the payment of future lease obligations. The purchase of noncash assets in exchange for equity or debt securities (D) similarly represents an exchange of financial instruments without the use of cash.

Examples of Transactions That Must Be Disclosed as Noncash Investing