Question

Starfish Shells had a beginning balance in Notes Payable of $35,000 and an ending balance of $40,000. This will be reported as _____ on the statement of cash flows. an increase of $5,000 in the cash flows from investing activities section a decrease of $5,000 in the cash flows from investing activities section an increase of $5,000 in the cash flows from financing activities section a decrease of $5,000 in the cash flows from financing activities section

Answer 1

Answer:

an increase of $5,000 in the cash flows from financing activities

Explanation:

There are three types of activities in the cash flow statement which are described below:  

1. Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.  

These changes in working capital would be adjusted. Moreover, the depreciation expense is added to the net income

2. Investing activities: It records those activities which include purchase and sale of the long term assets. The purchase is an outflow of cash whereas sale is an inflow of cash

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance. The issue of shares is an inflow of cash whereas redemption and dividend is an outflow of cash, and the increase in note payable is also recorded

The computation is shown below:

= Ending balance of note payable - beginning balance of note payable

= $40,000 - $35,000

= $5,000