Question

Louisiana Company uses the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance​ sheet:

Louisiana Company Comparative Balance Sheet December​ 31, 2019 and 2018
	2019	2018	​Increase/(Decrease)
Common Stock	​$32,000	​$2,400	​$29,600
Retained Earnings	​123,000	​76,000	​47,000
Treasury Stock	​(​15,000)	​(​8,200)	​(6,800)
Total Equity	​$140,000	​$70,200	​$69,800

​Note:

1. There were no stock retirements during the year.

2. There were no sales of treasury stock during the year.

Compute the cash flow from transactions involving treasury stock.

Answer 1

1. If both common stock and treasury stock are considered, then the cash flow is as follows.,

Louisiana Company
Cash Flow statement ( Partial )
December 31,2019
	$	$
Cash from financing activities;
Issue of common stock	29,600
Purchase of Treasury stock	(6,800)
Net cash from financing activities	22,800

2. If only treasury stock is considered,

The net cash flow is $ 6,800 negative of cash flow.

Purchase value of treasury stock is cash outflow.