7: A.1. Investing and Financing Activities, SCF Disclosures

Question 1

You have the income statement and the balance sheet for 2 years
And he asked you what the cash expense on the interest expense and the income tax expense, but here you want to know how much cash you pay.
how you would know?

Answer 1

here we look at the income statement and then we see the interest expense and the income tax expense, but we don’t talk it as it because we don’t know how relly we pay from it cash and how much is payable, so we look at the balance sheet liabilities section and look for accrude interest payable to look how the change from year 1 to year 2, as it it for the income tax payable.
its easy but we need to think with it logically

Question 2

Kelli Company acquired land by assuming a mortgage for the full acquisition cost. This transaction should be disclosed on Kelli’s statement of cash flows as a(n)

A. Operating activity.
B. Financing activity.
C. Noncash financing and investing activity.
D. Investing activity.

Answer 2

The correct answer C

Example of what happened:
Ahmad owns land worth $100,000

But Ahmad still owes the bank $100,000 (a mortgage loan on that land)

Now Omar comes and says:

“Ahmad, I won’t give you $100,000 — I’ll just take your place and continue paying the bank instead of you.”