Question

The following is a partiallist of transactions completed by the Ryan Company during its fifth year of operations.1 Sold land for $50,000 cash.2 Issued common stock for $20,000.3 Paid $27,000 cash to purchase delivery equipment.4 Issued a $15,000 note to a bank for cash.5 Paid a $10,000 cash dividend.6 Earned $60,000 of cash revenue.7 Paid $42,000 of cash expenses.Based on these events alone, the net cash flow from financing activities is$45,000.$35,000.$25,000.$20,000.Assuming all transactions are cash transactionsA) an increase in the balance in the Common Stock account suggests a cash inflow occurred.B) a decrease in the Notes Payable account suggests a cash inflow occurred.C) a decrease in the Retained Earnings caused by dividends suggests a cash inflow occurred.D) an increase in the Treasury Stock account suggests a cash inflow occurred.

Answer 1

Answer and Explanation:

The computation of the net cash flow from financing activities is shown below:

Cash flow from financing activities

Issue of common stock $20,000

Issue a note to a bank $15,000

Payment of cash dividend -$10,000

Net cash flows from financing activities $25,000

The positive amount shows the inflow of cash while the negative signs reflects the outflow of cash

The increase in the balance in the common stock shows the cash inflow as it increased the cash account and the stockholder equity account

The journal entry is also shown below for better understanding

Cash XXXXX

  To Common stock  XXXXX

(Being the common stock is recorded)