buck should present the borrowing and payment activity related to its revolving line of credit as cash flows from financing activity.
According to the 2301045, the definition of financing activities is that “ Financing activities include obtaining resources from owners and providing them with a return on, and a return of, their investment; receiving restricted resources that by donor stipulation must be used for longterm purposes; borrowing money and repaying amounts borrowed, or otherwise settling the obligation; and obtaining and paying for other resources obtained from creditors on longterm credit”( FASB Accounting Standard codification, 2301045).
As it also mentioned in FASB Accounting Standard Codification 230104514 and 230104515, then, “Proceeds from issuing bonds, mortgages, notes, and from other shortor longterm borrowing” and “payments of dividends or other distributions to owners, including outlays to reacquire the entity's equity instruments” are cash flows for financing activities. Therefore, Buck should present the borrowing and payment activities related to its revolving line of credit as cash flow from financing activities.
Part 2
In scenario 1 (net), all the borrowing and payment activities are based on net basis within the financing activities section of its statement of cash flows. As FASB ASC 23010459 indicates “amounts due on demand are considered to have maturities of three months or less.” Here the situation is all draws are considered to be due on demand. Since all the activities in scenario 1 can be considered to be due less than three months. And also
23010459
explains that original maturity of asset or liability, which is three months or less, will be reported as net. Therefore, all the activities in scenario 1 should be presented on a net basis.
In scenario 2 (net & gross), the financing activities should be