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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Effect of transactions on cash flows

State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows:

a. Retired $400,000 of bonds, on which there was $3,000 of unamortized discount, for $411,000.

b. Sold 20,000 shares of $5 par common stock for $22 per share.

c. Sold equipment with a book value of $55,800 for $60,000.

d. Purchased land for $650,000 cash.

e. Purchased a building by paying $50,000 cash and issuing a $450,000 mortgage note payable.

f. Sold a new issue of $500,000 of bonds at 98.

g. Purchased 10,000 shares of $40 par common stock as treasury stock at $50 per share.

h. Paid dividends of $1.50 per share. There were 1,000,000 shares issued and 120,000 shares of treasury stock.

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

To Show: The effect of the given transactions whether is a cash receipt or cash payment.

Explanation

  • Retired bonds will be reported under the financing activity section of the statement of cash flows as a cash payment of $411,000.
  • Sold 20,000 shares at 22 per share will be reported under the financing activity section of the statement of cash flows as a cash receipt of $440,000.
  • Sold equipment of $60,000 will be reported under the investing activity section of the statement of cash flows as a cash receipt of $60,000.
  • Purchased land by cash of $650,000 will be reported under the investing activity section of the statement of cash flows as a cash payment of $650,000.
  • Purchased building by paying cash of $50,000 will be reported under the investing activity section of the statement of cash flows as a cash payment of $50,000...

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