The following information was drawn from the year-end balance sheets of Finch River, Inc.:
Account Title | 2017 | 2016 | ||||
Bonds payable | $ | 735,000 | $ | 975,000 | ||
Common stock | 201,000 | 122,000 | ||||
Treasury stock | 27,500 | 10,500 | ||||
Retained earnings | 87,900 | 61,500 | ||||
Additional information regarding transactions occurring during 2017:
Finch River, Inc., issued $47,300 of bonds during 2017. The bonds were issued at face value. All bonds retired were retired at face value.
Common stock did not have a par value.
Finch River, Inc., uses the cost method to account for treasury stock.
The amount of net income shown on the 2017 income statement was $35,600.
Required
Determine the amount of cash flow for the retirement of bonds that should appear on the 2017 statement of cash flows.
Determine the amount of cash flow from the issue of common stock that should appear on the 2017 statement of cash flows.
Determine the amount of cash flow for the purchase of treasury stock that should appear on the 2017 statement of cash flows.
Determine the amount of cash flow for the payment of dividends that should appear on the 2017 statement of cash flows.
Prepare the financing activities section of the 2017 statement of cash flows.
Determine the amount of cash flow for the retirement of bonds, for the issue of common stock, for the purchase of treasury stock and for the payment of dividends that should appear on the 2017 statement of cash flows.
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Prepare the financing activities section of the 2017 statement of cash flows. (Cash outflows should be indicated with minus sign.)
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Bonds retired = Bonds payable, beginning + Bonds issued - Bonds payable, ending
= 975,000 + 47,300 - 735,000
= $287,300
Cash flow from the issue of common stock = Common stock, ending - Common stock, beginning
= 201,000 - 122,000
= $79,000
Cash flow for the purchase of treasury stock = Treasury stock, ending - Treasury stock, beginning
= 27,500 - 10,500
= $17,000
Cash payment for dividend = Retained earnings, beginning + Net income - Retained earnings, ending
= 61,500 + 35,600 - 87,900
= $9,200
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Kindly comment if you need further assistance. Thanks
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