Question

Most Solutions, Inc., issued 12% bonds, dated January 1, with a face amount of $520 million on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest expense is recorded at the effective interest rate. Interest is paid semiannually on June 30 and December 31. Most recorded the sale as follows: January 1, 2021 Cash (price) Discount on bonds (difference) Bonds payable (face amount) 464,911,512 55,088,488 520,000,000 Required: What would be the amount(s) related to the bonds that Most would report in its statement of cash flows for the year ended December 31, 2021? (List any cash outflow with a minus sign. Enter your answers in whole dollars.) Cash outflow from operating activities

Answer 1

SOLUTION:

MOST SOLUTIONS,INC.	AMOUNT $
BONDS PAYABLE(FACE AMOUNT)	520,000,000
COUPON RATE	12%
INTEREST PAID	62,400,000

CASH OUTFLOW FROM OPERATING ACTIVITIES	$ 62,400,000
CASH INFLOW FROM FINANCING	$ 464,911,512

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