Long-term Notes Payable was $20 million at the beginning of the year and $30 million at the end. During the year an additional $15 million was borrowed. Repayments on the statement of cash flow during the year were ______.Multiple choice question.$25 million under investing activities$25 million under financing activities$(35) million under financing activities$(5) million under financing activities$(5) million under investing activities$(35) million under investing activities
Question
Long-term Notes Payable was 30 million at the end. During the year an additional 15 million was borrowed. Repayments on the statement of cash flow during the year were ______.Multiple choice question.25 million under investing activities(35) million under financing activities(5) million under investing activities$(35) million under investing activities
Solution
To solve this, we need to understand how the long-term notes payable changed during the year.
At the beginning of the year, the long-term notes payable was $20 million.
During the year, an additional 35 million (15 million).
However, by the end of the year, the long-term notes payable was $30 million.
This means that repayments must have been made during the year to reduce the long-term notes payable from 30 million.
The amount of repayments can be calculated as follows:
30 million (amount at the end of the year) = $5 million
Therefore, the repayments on the statement of cash flow during the year were $5 million.
Since the repayment of a loan (notes payable) is a financing activity, the correct answer is:
$5 million under financing activities.
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