Effect of Transactions on Cash Flows

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

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

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

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

Purchased land for $650,000 cash.

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

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

Purchased 10,000 shares of $10 par common stock as treasury stock at $33.25 per share.

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

Amount
a. $
b. $
c. $
d. $
e. $
f. $
g. $
h. $

Explanation:

a. Cash paid for retirement of bonds would be deducted from cash flow's financing activities by 411,000

b. Cash received from issue of common stock would be added to the cash flow statement's financing activities as 440,000 [22*20,000]

c. Cash received from sale of equipment would be added to the cash flow statement's investing activities as 60,000

d. Cash paid for purchase of land would be deducted from cash flows from investing activities by 650,000

e. Cash paid for purchase of building would result in deduction from investing activities by 50,000

f. Cash received from issued of bonds would be added to the cash flows from financing activities as 490,000

[500,000/100 * 98]

g. Cash paid for purchase of treasury stock would decrease cash flows from financing activities by 332,500

[10,000*33.25]

h. Cash paid for dividents would be deducted from cash flow from financing activities by 1,320,000

[1,000,000 - 120,000]*1.50 = 1,320,000

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