ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)
Zeta Co had 8% loan notes of $400,000 at 1 January and $300,000 at 31 December. During the year it issued no new loan notes and repaid some at par. Loan interest is paid in cash and shown separately. What is the financing cash flow for the loan notes?
The financing cash flow is an outflow of $100,000, because loan notes fell from $400,000 to $300,000 with no new issues, meaning that amount was repaid at par. Interest is reported separately, so it is not included in the capital repayment.
- AOutflow of $100,000Correct
- BInflow of $100,000
- COutflow of $132,000
- DOutflow of $124,000
Explanation
Loan notes fell from $400,000 to $300,000 with no issues, so $100,000 was repaid in cash. This is a financing outflow. The interest of $32,000 (8% x $400,000) is not part of the capital repayment, so options including it are wrong.
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