Question

State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows:

a. Sold equipment with a book value of $78,000 for $94,000.
b. Sold a new issue of $250,000 of bonds at 102.
c. Retired $400,000 of bonds, on which there was $4,000 of unamortized discount, for $475,000.
d. Purchased 3,000 shares of $30 par common stock as treasury stock at $40 per share.
e. Sold 4,000 shares of $25 par common stock for $50 per share.
f. Paid dividends of $1.50 per share. There were 40,000 shares issued and 5,000 shares of treasury stock.
g. Purchased land for $287,000 cash.
h. Purchased a building by paying $60,000 cash and issuing a $50,000 mortgage note payable.

Answer 1

The answer is:

A - Cash receipt $94,000.

B - Cash receipt $255,000

C - Cash payment $475,000

D - Cash payment $120,000

E - Cash receipt $200,000

F - Cash payment. $52,500

G - Cash payment. $287,000

H - Cash payment. $60,000

Step-by-step explanation:

A - Cash receipt $94,000. $94,000 was collected for the sale of equipment

B - Cash receipt $255,000. At 102 percent means it increased by 2 percent. 102% x $250,000 equals $255,000

C - Cash payment $475,000. The bond was retired i.e the bond issuer paid the bondholder $475,000

D - Cash payment $120,000(4,000 shares x $50)

E - Cash receipt $200,000(3,000 shares x $40)

F - Cash payment. $52,500. Treasury stock reduces shares issued. So the new shares will be $35,000($40,000 -$5,000). Total dividends paid now equals $52,500($35,000 x $1.50)

G - Cash payment. $287,000. Payment of $287,000 was done

H - Cash payment. $60,000. Cash payment was $60,000 in this transaction.