The purchase of an office building by issuing long-term notes payable should be reported as a:
A) cash outflow in the financing section of the statement of cash flows.
B) cash outflow in the investing section of the statement of cash flows.
C) cash outflow in the operating section of the statement of cash flows.
D) noncash investing and financing activity.

Question

Quizplus · Accepted Answer

The purchase of an office building by issuing long-term notes payable is a noncash transaction that affects both investing and financing activities but does not involve an immediate cash flow. Therefore, it should be reported in a separate section of the statement of cash flows or in the notes to the financial statements, not as a cash outflow in any of the three main sections (operating, investing, or financing).

The Purchase of an Office Building by Issuing Long-Term Notes