Problem 14-16A (Algo) Determining cash flows from financing activities LO 14-4 The following information was drawn from the year-end balance sheets of Adams River, Inc. Account Title Year 2 Year 1 Bonds payable $635,000 $955,000 Common stock 209,000 134,000 33,500 14,500 89, 100 62,600 Treasury stock Retained earnings Additional information regarding transactions occurring during Year 2: Adams River, Inc. issued $48,800 of bonds during Year 2. The bonds were issued at face value. All bonds retired were retired at face value. Common stock did not have a par value. Adams River, Inc. uses the cost method to account for treasury stock. The amount of net income shown on the Year 2 income statement was $33,500. equired Determine the amount of cash flow for the retirement of bonds that should appear on the Year 2 statement of cash flows. Determine the amount of cash flow from the issue of common stock that should appear on the Year 2 statement of cash flows. Determine the amount of cash flow for the purchase of treasury stock that should appear on the Year 2 statement of cash flows. Determine the amount of cash flow for the payment of dividends that should appear on the Year 2 statement of cash flows. Prepare the financing activities section of the Year 2 statement of cash flows. Complete this question by entering your answers in the tabs below. Req A to D Req E Determine the amount of cash flow for the retirement of bonds, for the issue of common stock, for the purchase of treasury stock and for the payment of dividends that should appear on the Year 2 statement of cash flows. a. d. Cash flow for the retirement of bonds Cash flow from the issue of common stock Cash flow for the purchase of treasury stock Cash flow for the payment of dividends Show less
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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