Question

Baker's net income for the current year was $78,000 and dividends of $28,000 were declared and paid. Common stock was issued for $200,000. What amount should Baker report as cash provided by operating activities in its statement of cash flows for the current year under U.S. GAAP?

a. $192,000
b. $20,000
c. $50,000
d. $250,000

Answer 1

It is $50,000

Step-by-step explanation:

Cash flow from operating activities indicates the amount of money a company realized from its regular business activities, such as manufacturing and selling goods or providing a service to customers. It is the first section depicted on a company's cash flow statement.

Here the net income from operation is $78,000. Adjusting for dividends paid of $28,000 will give us net increase in cash flow from operating activities.

The $200,000 from common stock issued is a financing item, hence, it will not be considered under operating activity.