Final answer:
The Statement of Cash Flows captures the cash transactions for equipment scrapping (non-effective), bond retirement (-$100,000), stock issuance (+$65,000), and dividends (-$25,000). The net cash flow from financing activities is calculated as -$60,000, an outflow. Note that operating and investing activities are not included due to lack of information.
Step-by-step explanation:
Statement of Cash Flows Preparation
When constructing a statement of cash flows using the indirect method, we start with the net income and adjust it for non-cash transactions and changes in working capital. However, as a net income figure is not provided, we'll focus on the given cash flow information:
- (a) Equipment with a cost of $60,000 was scrapped with no salvage value. This transaction does not affect the cash flow because the equipment was fully depreciated.
- (b) $100,000 in bonds payable were retired at face value. This is a cash outflow under financing activities and would be recorded as a decrease of $100,000.
- (c) 5,000 shares of common stock were issued at $13 per share for cash, resulting in a cash inflow of $65,000 under financing activities.
- (d) Cash dividends of $25,000 were declared and paid, which is a cash outflow under financing activities.
Calculation of Cash Flow from Financing Activities
Proceeds from issuing common stock: $13/share × 5,000 shares = $65,000 (Inflow)
Payment to retire bonds: -$100,000 (Outflow)
Dividends paid: -$25,000 (Outflow)
Net cash flow from financing activities: $65,000 - $100,000 - $25,000 = -$60,000 (Outflow)
Note: Since no beginning cash balance or other operating or investing cash flows are given, we have limited information and only show the cash flows from financing activities.