Question

APS Company issued 20,000 shares of $1 par common stock for $40 per share during 2022. The company paid dividends of $48,000 and issued long-term notes payable of $440,000 during the year. What amount of cash flows from financing activities will be reported on the statement of cash flows?
a. $1,195,000 net cash inflow.
b. $352,000 net cash inflow.
c. $705,000 net cash outflow.
d. $1,192,000 net cash inflow.

Answer 1

Answer:

The answer is D. $1,192,000 net cash inflow

Explanation:

For financing activities under cash flow, inflows are what is coming in like issuance of bond, obtaining loan from bank. This money is coming into the business for investments and outflows are what is going out of the business e.g paying dividend to shareholders.

The inflows here are:

The issuance of 20,000 shares of $1 par common stock for $40 per share which is $800,000(20,000 shares x $40 per share) and also the long-term notes payable of $440,000

Therefore total inflows are $800,000 + $440,000

=$1,240,000

There is only one outflow which is the dividends of $48,000

So what will be reported under cash flows from financing activities is

$1,240,000 - $48,000

= $1,192,000