Question

Madisun Company issued common stock for proceeds of $20,000 during 2020. The company paid dividends of $5,000. The company also issued a long-term note payable for $35,000 in exchange for equipment during the year. The company sold treasury stock that had a cost of $3,000 for $9,000Compute net cash flows from financing activities.

Answer 1

Answer:

Net cash flows from financing activities is $24,000

Explanation:

Cash flow from financing activities:

Proceeds from stock issue                      $20,000

Dividends                                                  ($5,000)

Sale of treasury stock                                $9,000

net cash flow from financing activities      $24,000

The issue of long-term note payable of $35,000 does not involve an actual movement of cash,hence has zero impact on the cash flow from financing activities.

The dividends payment has negative sign because it is an outflow of cash unlike others that cash inflows.