Asked by Maddie Murch on Apr 27, 2024
Verified
Which of the following would result when a company lends cash to a customer in exchange for a ten-month note receivable?
A) A noncurrent asset and an investing cash flow are created.
B) A noncurrent asset and a financing cash flow are created.
C) A current asset and a financing cash flow are created.
D) A current asset and an investing cash flow are created.
Note Receivable
A written promise for the amounts to be received, typically recording a receivable where the individual or entity promises to pay a sum of money at a future date.
Investing Cash Flow
Cash generated or spent on activities related to a company's investments, such as purchasing or selling assets.
- Discern the classification of cash exchanges in the cash flow statement and their impact on a business's monetary position.
Verified Answer
DA
Degefe AnuloMay 04, 2024
Final Answer :
D
Explanation :
Lending cash to a customer in exchange for a ten-month note receivable creates a current asset (since it's expected to be converted into cash within a year) and is considered an investing activity, as it involves providing resources for the purpose of generating future income.
Learning Objectives
- Discern the classification of cash exchanges in the cash flow statement and their impact on a business's monetary position.