Question

Smiley Corp.'s transactions for the year ended December 31, 2018 included the following:

Purchased real estate for $1,250,000 cash which was borrowed from a bank.
Sold available-for-sale securities for $1,000,000.
Paid dividends of $1,200,000.
ssued 500 shares of common stock for $500,000.
Purchased machinery and equipment for $250,000 cash.
Paid $900,000 toward a bank loan.
Reduced accounts receivable by $200,000.
Increased accounts payable $400,000.
Smiley's net cash used in financing activities for 2018 was

a. $450,000.
b. $350,000.
c $900,000.
d. $850,000.

Answer 1

Explanation:

The following information was taken from the 2018 financial statements of Dunlop Corporation:

Bonds payable, January 1, 2018

$ 800,000

Bonds payable, December 31, 2018

4,800,000

During 2018

• A $720,000 payment was made to retire bonds payable with a face amount of $800,000.

• Bonds payable with a face amount of $320,000 were issued in exchange for equipment.

In its statement of cash flows for the year ended December 31, 2018, what amount should Dunlop report as proceeds from issuance of bonds payable?

Answer 2

b. -$350,000

Step-by-step explanation:

The calculation of net cash used in financing activities is shown below:-

Net cash used in cash flow from financing activities = Borrow from bank - Dividend paid + Issue common Stock - Loan repaid

= $1,250,000 - $1,200,000 + $500,000 - $900,000

= -$350,000

Therefore for calculating the net cash used in financing activities we simply applied the above formula.