Question

During the year, Next Tec Corp. had the following cash flows: receipt from customers, $20,000; receipt from the bank for long-term borrowing, $6,400; payment to suppliers, $5,600; payment of dividends, $2,000, payment to workers, $2,500; and payment for machinery, $9,500. What amount would be reported for net financing cash flows on the Statement of Cash Flows?

Answer 1

Answer:

Net inflow from financing activities = $4,400

Explanation:

Provided information,

Financing Activities are those activities which are done to get finance for the company, that is any expense related to generation of funds for the company, or any funds raised.

Here Financing activities are:

Receipt from bank for long term borrowings = $6,400

Less: Payment of dividend = $2,000

Net inflow from financing activities = $4,400

Purchase of machinery is investing activity, payment to workers is operating activity, payment to suppliers is operating activity, Receipt from customer is operating activities.

Net inflow from financing activities = $4,400

Answer 2

Answer:

The $4,400 is the amount which should be reported for net financing cash flows on the Statement of Cash Flows.

Explanation:

Financing activity: The financing activity is that activity that involves long term liabilities transactions. For example the issue of shares, the redemption of bonds/ debentures, dividend payment ,etc.

The amount which is reported for net financing activity is shown below:

= Receipts from the bank for long - term borrowing - payment of dividend

= $6,400 - $2,000

= $4,400

The receipts from a customer is an operating activity which is come under the direct method of cash flow statements.

Again, payment to suppliers and payment to workers is also an operating activity which comes under the direct method of cash flow statements.

And, the payment of machinery is an investing activity

Thus, these transactions are not considered.

Hence, the $4,400 is the amount which should be reported for net financing cash flows on the Statement of Cash Flows.