Question

Effect of Transactions on Cash Flows State the effect (cash receipt or cash payment and amount) of each of the following transactions, considered individually, on cash flows: a. Retired $500,000 of bonds, on which there was $4,000 of unamortized discount, for $510,000. b. Sold 20,000 shares of $5 par common stock for $30 per share. c. Sold equipment with a book value of $68,900 for $72,400. d. Purchased land for $825,000 cash. e. Purchased a building by paying $30,000 cash and issuing a $570,000 mortgage note payable. f. Sold a new issue of $400,000 of bonds at 98. g. Purchased 10,000 shares of $10 par common stock as treasury stock at $22.50 per share. h. Paid dividends of $1.25 per share. There were 1,000,000 shares issued and 180,000 shares of treasury stock. Effect Amount Cash payment A A Cash payment Cash receipt A A A A A

Answer 1

Ans:

	Effect	Amount	calculation
a.	cash payment	510000
b	cash receipt	600000	20000*30
c	cash receipt	72400
d	cash payment	825000
e	cash payment	30000
f	cash receipt	392000	400000*0.98
g	cash payment	225000	10000*22.5
h	cash payment	1025000	(1000000-180000)*1.25