Question

A company reported that its bonds with a par value of $50,000 and a carrying value of $60,500 are retired for $64,200 cash, resulting in a loss of $3,700.
The amount to be reported under cash flows from financing activities is:

a) Zero. This is an operating activity.

b) $(64,200).

c) $(3,700).

d) Zero. This is an investing activity.

e) $(60,500).

Answer 1

Answer:

b) $(64,200)

Explanation:

Financing activities: It reports transactions that have an effect on long-term debt and equity balance of shareholders. The issue of shares is cash inflow, whereas redemption and payment of the dividend is a cash outflow.

So, the amount which is recorded under the financing activity is $64,200 as it includes the cash transaction which represents the outflow of cash