ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)
Alder Co had 10% loan notes of $400,000 at 1 January and $300,000 at 31 December. No new loans were issued during the year. Interest of $35,000 was paid in cash during the year and is classified as a financing flow by the company. What is the net cash outflow shown under financing activities in respect of the loan notes?
The net financing outflow is $135,000, being the $100,000 loan principal repaid plus $35,000 interest paid, which the company classifies as financing. Leaving out the interest would give only $100,000.
- A$100,000
- B$135,000Correct
- C$65,000
- D$140,000
Explanation
Repayment of loan principal is $400,000 - $300,000 = $100,000. Interest paid of $35,000 is also classified as financing, so the total outflow is $135,000. Showing only the principal ignores the interest paid.
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