Question

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

1. Retired $310,000 of bonds, on which there was $3,100 of unamortized discount, for $322,000.
2. Sold 7,000 shares of $30 par common stock for $66 per share.
3. Sold equipment with a book value of $51,600 for $74,300.
4. Purchased land for $392,000 cash.
5. Purchased a building by paying $86,000 cash and issuing a $120,000 mortgage note payable.
6. Sold a new issue of $270,000 of bonds at 99.
7. Purchased 4,800 shares of $30 par common stock as treasury stock at $55 per share.
8. Paid dividends of $2.50 per share. There were 27,000 shares issued and 4,000 shares of treasury stock.

Answer 1

a. Cash payment = $322,000

b. Cash receipt from sale of common stock = Number of common shares issued x Issue price per share

= 7,000 x 66

= $462,000

c. Cash receipt from sale of equipment = $74,300

d. Cash payment for purchase of land = $392,000

e. Cash payment for building purchased = $86,000

f. Cash receipts from issue of bonds = 270,000 x 99%

= $267,300

g. Cash payment for purchase of Treasury stock = Number of shares bought x Price per share

= 4,800 x 55

= $264,000

h. Cash payment for dividend = Number of outstanding shares x Dividend per share

= ( 27,000-4,000) x 2.50

= $57,500

Kindly comment if you need further assistance.

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