Strawbale Inc purchases a 600000 building paying 400000 in c

Strawbale, Inc. purchases a $600,000 building, paying $400,000 in cash and signing a $200,000 promissory note. What will be reported on the statement of cash flows as a result of this transaction?

Multiple Choice

A $600,000 cash outflow from investing activities

A $400,000 cash outflow from investing activities and a $200,000 cash inflow from financing activities

A $400,000 cash outflow from investing activities and a $200,000 noncash transaction

A $600,000 cash outflow from investing activities and a $200,000 cash inflow from financing activities

Solution

Solution:

The transaction results $400,000 cash outflow from investing activities and a $200,000 noncash transaction.

Because, $400,000 cash paid for purchase of building which is an outflow of cash and the remaining amount (i.e.$200,000) was settled through the non cash payment by signing a promissory note (i.e. settled the remaining amount by taking the loan on a promissory note)