Question

Suppose Zenon Co. issued a long-term bond and received $250,000 cash from the issuance during 2015. The company also issued 12,000 shares of common stock for $260,000. At the end of the year, Zenon paid $165,000 for the dividend declared last year. What would be the net impact of these transactions on Zenon's 2015 statement of cash flows under US GAAP?

a) $510,000 would be shown as an increase in the Financing Section and the $165,000 would be shown as a decrease in the Operating Section.

b) $260,000 would be shown as an increase in the Financing Section and the $250,000 would be shown as an increase in the Investing Section.

c) $345,000 would be shown as an increase in the Financing Section.

d) $260,000 would be shown as an increase in the Financing Section, the $250,000 would be shown as an increase in the Investing Section, and the $165,000 would be shown as a decrease in the Operating Section.

Answer 1

Answer:

Option (c) is correct.

Explanation:

The net impact in Cash flow statement (Cash flow financial activities  will be:

= Amount received from issuing bonds + Amount received from issuing common stock + Paid for dividend

= $250,000 + $260,000 + $165,000

= $345,000

Note:

Long-term bond & issue of common stock are Cash inflow from financial operations.

Dividend paid is regarded as Cash outflow from financial operations.