Question

Reporting Issuance and Retirement of Long-Term DebtOn the basis of the details of the following bonds payable and related discount accounts, indicate the items to be reported in the Financing Activities section of the statement of cash flows, assuming no gain or loss on retiring the bonds:ACCOUNT Bonds PayableACCOUNT NO. BalanceDateItemDebitCreditDebitCreditJan.1 Balance 390,000 2 Retire bonds78,000 312,000 June30 Issue bonds 234,000 546,000

Answer 1

Cash flows from financing activities:

Cash received from issuing bonds payable.....$224,000

Less: Cash paid to redeem bonds payable.........$73,600

Note: The discount amortization of $1,400 would be shown as an adjusting item (increase) in the Cash Flows from Operating Activities section under the indirect method.

What Is Cash Flow?

The term cash flow refers to the net amount of cash and cash equivalents being transferred in and out of a company. Cash received represents inflows, while money spent represents outflows.

A company’s ability to create value for shareholders is fundamentally determined by its ability to generate positive cash flows or, more specifically, to maximize long-term free cash flow (FCF).

FCF is the cash generated by a company from its normal business operations after subtracting any money spent on capital expenditures .

Your question is incomplete, but most probably your full question was:

Reporting Issuance and Retirement of Long-Term Debt On the basis of the details of the following bonds payable and related discount accounts, indicate the items to be reported in the Financing Activities section of the statement of cash flows, assuming no gain or loss on retiring the bonds: ACCOUNT Bonds Payable ACCOUNT NO. BalanceDateItemDebitCreditDebitCreditJan.1 Balance 390,000 2 Retire bonds78,000 312,000 June30 Issue bonds 234,000 546,000 ACCOUNT Discount on Bond Payable ACCOUNT NO. BalanceDateItemDebitCreditDebitCreditJan.1 Balance 17,550 2 Retire bonds 6,240 11,310 June30 Issue bonds15,700 27,010 Dec.31 Amortize discount 1,350 25,660

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