Question

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet:
2014 2013 Increase/decrease
Accounts payable $ 4,000 $ 6,000 $(2,000)
Accrued liabilities 2,000 1,000 1,000
Long-term notes payable 84,000 90,000 (6,000)
Total liabilities $90,000 $97,000 $(7,000)
Additional information provided:
During 2014, the company repaid $40,000 of long-term notes payable.
During 2014, the company borrowed $34,000 on a new note payable.
Based on the above information only, what amount of net cash flow would be shown in the financing section of the statement of cash flows?
A) $6,000 negative
B) $6,000 positive
C) $5,000 positive
D) $7,000 negative

Answer 1

Answer:

D) $7,000 negative

Explanation:

What amount of net cash flow would be shown in the financing section of the statement of cash flows?

Amount of net cash flow to be shown in the financing section of the statement of cash flows = Decrease in Account payable - Increase in accrued liabilities + Borrow of new  long term notes payable - Repayment of long term notes payable

= -$2,000 + $1,000 + $34,000 - $40,000

= -$7,000