Question

The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Which of the following is true if Baldwin issues bonds:________

a. It is a source of cash and will be shown in the financing section as an addition.
b. It is a use of cash, and will be shown in the operating section as a subtraction.
c. It is a source of cash, and will be shown in the operating section as an addition.
d. It is a use of cash, and will be shown in the financing section as a subtraction.

Answer 1

Answer: a. It is a source of cash and will be shown in the financing section as an addition.

Step-by-step explanation:

Issuing bonds is a part of raising money for a company to engage in company activities and as such goes into the financing section of a Company's Cash flow statement.

The Cash flow from financing activities section includes any and all activities that have to do with the raising of money for the company and as such includes as well as issuing bonds, issuing shares, and paying dividends.

Money coming in from debt and equity issuance will be inflows (additions) whilst paying off Dividends and debt as well as repurchasing stock would go here as well but as an outflow( subtraction).