Question

The following information was taken from the accounting records of Gorky Corporation for the year ended December 31, Year 1: Cash received from issuance of notes payable $8,000,000 Dividends paid on Gorky common stock 800,000 Repayment of notes payable 4,000,000 Payment for purchase of machinery 1,000,000 Proceeds from sale of plant building 2,400,000 Gain on sale of plant building 400,000 The net cash flows from investing and financing activities that should be presented on Gorky’s statement of cash flows for the year ended December 31, Year 1, are respectively A. $1,400,000 and $3,200,000. B. $1,400,000 and $4,000,000. C. $1,800,000 and $4,000,000. D. $1,800,000 and $3,200,000.

Answer 1

Answer:

Cash flow generated from financing activities: 5,200,000

Explanation:

Financing activities are the cash outflow and inflow from the company's debt and equity. Take and repayment of debt, interest on debt and dividend yield will be included in this section:

Cash received from issuance of notes payable    8,000,000

Dividends paid on Gorky common stock                (800,000)

Repayment of notes payable                               (4,000,000)  

Cash flow generated from financing activities: 5,200,000

The machinery and planyt building are not financing activities. So we ignore them.