Question

The Divirgil Company Net Income is $100. Given the following items:Purchase of debt securities (trading) $7Amortization of premium on bonds payable $4Purchase of treasury stock $5Decrease in dividends payable $2Increase in retained earnings $92Change in Cash for the year is:___________.a. $74b. $76c. $82d. $84e. $78

Answer 1

Answer:

a. $74

Explanation:

The computation in the change in cash for the year is shown below:

Net income                  $100  

Less: Purchase of Debt Securities  -$7  

Less: Amortization of Premium on Bonds payable  -$4  

Less: Purchase of Treasury Stock      -$5  

Less: cash Dividends paid            -$10 {($100 - $92) + $2}

Change in Cash          $74  

Hence, the correct option is A. $74

We simply deduct all the items from the net income so that the change in cash could come