[paragon]

Hi

It seems like if you buy an investment asset (say equipment) with debt or partial debt the debt part isnt on the Stmnt of CF. Is that right and why? Came across a Becker Q where equipment was bought with 20K cash and a 30K note and only the 20K portion was a use of cash in the Investing section. Id think it would be a 50K use in investing and a 30K source in fiannacing, no?

[Anonymous]

In order for a transaction to appear on the CF statement, cash actually has to be debited or credited. When you purchase equipment on credit, the J/E is…

Dr. Equipment

Cr. A/P

Since cash isn't in the J/E, this transaction will not appear on the CF statement right away. However, all significant non cash transactions have to be disclosed in the footnotes of the CF statement. Hope that helps!

[jenuno01]

Nope. Becker is correct. Whenever you're asked to figure out the Cash Flow effect of a transaction, do a journal entry. In this case, the J/E would look like this:

Equipment

---

50,000

Note Payable

---

30,000

Cash

---

20,000

There is $20,000 cash outflow in the Investing section.

Class of 2012

[paragon]

Thanks alot, I knew it had to be right, just “intellectually” doesnt feel like a proper representation of your cash flows. Thanks again guys

[Author]

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