Question

A company had the following cash flows for the year: (a) Purchased land, $60,000 (b) Borrowed from a local bank, $100,000 (c) Increase in salaries payable, $50,000 (d) Issued common stock, $75,000 (e) Paid dividends, $20,000 (f) Sold equipment, $40,000 (g) Increase in accounts receivable, $120,000 What amount would be reported for net financing cash flows in the statement of cash flows?

1) $155,000.
2) ($20,000).
3) $40,000.
4) $70,000.

Answer 1

Answer:

1) $155,000

Explanation:

Financing activities: It records those activities which affect the long term liability and shareholder equity balance. The issue of shares is an inflow of cash whereas redemption and dividend is an outflow of cash.

Cash flow from Financing activities  

Borrowed from a local bank $100,000

Issued common stock $75,000

Paid dividends - $20,000

Net Cash flow from Financing activities     $155,000

All other information which is given is not relevant as it related to the operating and investing activities. Hence, ignored it