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a.
Calculate the
a.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Beginning balance in bonds payable account = $600,000
Ending balance in bonds payable account = $400,000
Amount of bonds issued during the year = $90,000
Therefore, the cash flow for the retirement of bond is $290,000.
b.
Calculate the cash flow from the issuance of common stock.
b.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Beginning balance in common stock account = $150,000
Ending balance in common stock account = $190,000
Therefore, the cash flow from the issuance of common stock is $40,000.
c.
Calculate the cash flow from the issuance of
c.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Beginning balance in treasury stock account = $15,000
Ending balance in treasury stock account = $20,000
Therefore, the cash flow from the issuance of treasury stock is $5,000.
d.
Calculate the cash flow for the payment of dividends.
d.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Beginning balance in
Ending balance in retained earnings account = $96,000
Amount of net income during the year = $49,000
Therefore, the cash flow for the payment of dividends is $33,000.
e.
Prepare the financing activities section of the statement of cash flows for 2017.
e.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Statement of cash flows: Statement of cash flows reports all the cash transactions which are responsible for inflow and outflow of cash and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.
Cash flows from financing activities: Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.
Cash flows from financing activities |
Add: Issuance of common stock |
Proceeds from borrowings |
Proceeds from sale of treasury stock |
Proceeds from issuance of debt |
Deduct: Payment of dividend |
Repayment of debt |
Interest paid |
Redemption of debt |
Purchase of treasury stock |
Net cash provided from or used by financing activities |
Table (1)
The financing activities section of the statement of cash flows:
L Company | ||
Statement of Cash Flows (Partial) | ||
For the Year 2017 | ||
Details |
Amount ($) |
Amount ($) |
Financing activities: | ||
Amount received from issuance of bond liabilities | 90,000 | |
Amount received from issuance of common stock (Refer point b.) | 40,000 | |
Less: Amount paid for the bond liabilities (Refer point a.) | (290,000) | |
Amount paid for purchase of treasury stock (Refer point c.) | (5,000) | |
Dividend paid (Refer point d.) | (33,000) | |
Net cash used for financing activities | $(198,000) |
Table (2)
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Chapter 12 Solutions
Fundamental Financial Accounting Concepts, 9th Edition
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