Fundamental Financial Accounting Concepts
Fundamental Financial Accounting Concepts
10th Edition
ISBN: 9781259918186
Author: Thomas P Edmonds, Christopher Edmonds, Frances M McNair, Philip R Olds
Publisher: McGraw-Hill Education
Question
Book Icon
Chapter 12, Problem 16AP

a.

To determine

Calculate the cash flow for the retirement of bond.

a.

Expert Solution
Check Mark

Explanation of Solution

Beginning balance in bonds payable account = $800,000

Ending balance in bonds payable account = $600,000

Amount of bonds issued during the year = $100,000

Amountfortheretirement of bond]=[(Beginning balanceof bonds payable)+(Bonds issuedduring the year)(Ending balanceofbonds payable)]

Amountfortheretirement of bond]=($800,000+$100,000)$600,000=$900,000$600,000=$300,000

Conclusion

Therefore, the cash flow for the retirement of bond is $300,000.

b.

To determine

Calculate the cash flow from the issuance of common stock.

b.

Expert Solution
Check Mark

Explanation of Solution

Beginning balance in common stock account = $180,000

Ending balance in common stock account = $210,000

Amount of cashfrom theissuance ofcommon stock]=(Ending balanceof common stock)(Beginning balanceofcommonstock)

Amount of cashfrom theissuance ofcommon stock]=($210,000+$180,000)=$30,000

Conclusion

Therefore, the cash flow from the issuance of common stock is $30,000.

c.

To determine

Calculate the cash flow from the issuance of treasury stock.

c.

Expert Solution
Check Mark

Explanation of Solution

Beginning balance in treasury stock account = $5,000

Ending balance in treasury stock account = $20,000

Amount of cashfrom theissuance oftreasury stock]=(Ending balanceof treasury stock)(Beginning balanceoftreasurystock)

Amount of cashfrom theissuance oftreasury stock]=($20,000+$5,000)=$15,000

Conclusion

Therefore, the cash flow from the issuance of treasury stock is $15,000.

d.

To determine

Calculate the cash flow for the payment of dividends.

d.

Expert Solution
Check Mark

Explanation of Solution

Beginning balance in retained earnings account = $75,000

Ending balance in retained earnings account = $86,000

Amount of net income during the year = $32,000

Amountforthepayment of dividend]=[(Beginning balance)+(Net income)(Ending balance)]

Amountforthepayment of dividend]=($75,000+$32,000)$86,000=$107,000$86,000=$21,000

Conclusion

Therefore, the cash flow for the payment of dividends is $21,000.

e.

To determine

Prepare the financing activities section of the statement of cash flows for Year 2.

e.

Expert Solution
Check Mark

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:

F Company
Statement of Cash Flows (Partial)
Year 2
Details

Amount

($)

Amount

($)

Financing activities:
Amount received from issuance of bond liabilities100,000

Amount received from issuance of common stock

(Refer point b.)

30,000
Less: Amount paid for the bond liabilities (Refer point a.)(300,000)

Amount paid for purchase of treasury stock

(Refer point c.)

(15,000)
Dividend paid (Refer point d.)(21,000)
Net cash used for financing activities($206,000)

Table (2)

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education