Suppose Waterman Cable Company lent $125,000 to Comcast. On December 31, 2015, Comcast paid back the $125,000 and also paid $3,000 interest to Waterman Cable Company. Under U. S. GAAP, what would be the impact of the repayment on Waterman Cable Company's statement of cash flows using the direct method? a. The $125,000 would be shown as an increase in the funds in the Financing Section but the $3,000 would be shown as an increase in the Investing Section. b. The $128,000 would be shown as an increase in the funds in the Operating Section. c. The $125,000 would be shown as an increase in the funds in the Investing Section but the $3,000 would be shown as an increase in the Operating Section. d. The $128,000 would be shown as an increase in the funds in the Investing Section.

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Business

Alicia Cardenas

Today, 09:59

Suppose Waterman Cable Company lent $125,000 to Comcast. On December 31, 2015, Comcast paid back the $125,000 and also paid $3,000 interest to Waterman Cable Company. Under U. S. GAAP, what would be the impact of the repayment on Waterman Cable Company's statement of cash flows using the direct method? a. The $125,000 would be shown as an increase in the funds in the Financing Section but the $3,000 would be shown as an increase in the Investing Section. b. The $128,000 would be shown as an increase in the funds in the Operating Section. c. The $125,000 would be shown as an increase in the funds in the Investing Section but the $3,000 would be shown as an increase in the Operating Section. d. The $128,000 would be shown as an increase in the funds in the Investing Section.

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Brayden Boyd · Answer 1

D The $128,000 would be treated as cash from investing activities.

Explanation:

First and foremost, the cash - both principal repayment and interest thereon were received because Waterman Cable invested in another business by way of loan.

It should not be classified as cash from operations as the company is not a financial institution set up to give loans neither can it be seen as cash from financing activities since no cash was received from Waterman Cable providers of funds such shareholders and debt financiers.