Question

Abbott Co. is preparing its statement of cash flows for the year. Abbott's cash disbursements during the year included the following:
Payment of interest on bonds payable $500,000
Payment of dividends to stockholders 300,000
Payment to acquire 1,000 shares of
Marks Co. common stock 100,000
What should Abbott report as total cash outflows for financing activities in its statement of cash flows under U.S. GAAP?

A. $300,000
B. $900,000
C. $0
D. $800,000

Answer 1

Answer:

A. $300,000

Explanation:

As when we discuss the financing transactions in relation to cash flow statement, financing transactions are the one which include the transactions related to finance the business.

But the payment of interest is not part of financing transaction but is part of operating transactions.

Further dividend paid to shareholders is financing transactions.

Any amount invested in any other company through acquisition of shares is classified as investing activity.

Thus, in the given instance only the dividend paid to stockholders is financing transaction.