Question

Cash Flows from Financing Activities Murray Company earned net income of $450,000 in 20X2. Murray provided the following information: Murray Company Comparative Balance Sheets At December 31, 20X1 and 20X2 20X1 20X2 Bonds payable $ — 235,000 Mortgage payable 50,000 — Common stock 187,500 187,500 Paid-in capital in excess of par 140,000 140,000 Retained earnings 912,500 1,162,500 Required: Compute the financing cash flows for the current year. Use a minus sign to indicate a cash outflow."

Answer 1

-$15,000

Step-by-step explanation:

The computation of financing cash flows for the current year is shown below:-

For computing the financing cash flows first we need to find out the dividend paid

Dividend paid = Retained earnings 2021 + Net income - Retained earning 2022

= $912,500 + $450,000 - $1,162,500

= $200,000

Financing cash flow = Issue bonds payable - Repayment of Mortgage payable - Dividend paid

= $235,000 - $50,000 - $200,000

= -$15,000

Therefore, for computing the financing cash flow for the current year we simply applied the above formula.