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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

A corporation issued $2,000,000 of 20-year bonds for cash at 98. How would the transaction be reported on the statement of cash flows?

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.

Following are the four classifications of cash flows activities that are related to the cash flow statement:

  • Operating Activities: In the operating activities section of the cash flow statement, cash inflows from the revenue of the business operations are reported, while cash outflows for the expenses for the business operations are reported.
  • Investing activities: In the investing activities section of the cash flow statement, increase and decrease in the long-term assets representing outflow and inflow of cash on account of investing activities is reported.
  • Financing activities: In the financing activities section of the cash flow, increase and decrease in the long-term liabilities and equities representing inflow and outflow of cash on account of financing activities are reported.
  • Non-cash activities: The transactions where cash is not involved are treated as non-cash activities.

To Explain: The transaction that would be reported on the statement of cash flows.

Explanation

Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

The below table shows the way of calculation of cash flows from financing activities:

Cash flows from financing activities
Add: Issuance of common stock
          Proceeds from borrowings
          Issua...

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