On January 1, Year 1, DIBA Company had a balance of $450,000 in its Bonds Payable account. During Year 1, DIBA issued bonds with a $200,000 face value. There was no premium or discount associated with the bond issue. The balance in the Bonds Payable account on December 31, Year 1, was $400,000.

Required
a. Determine the cash outflow for the repayment of bond liabilities assuming that the bonds were retired at face value.
b. Prepare the financing activities section of the 2016 statement of cash flows.

The answer is given below;

Explanation:

a. Bonds opening balance   $450,000

Add; Bonds issued during the year $200,000

Less:Bonds closing balance          ($400,000)

Bonds paid during the year     $250,000

b. Financing activities

Cash outflow on repayment of bonds ($250,000)

Cash inflow on issuance of new bonds $200,000

Net Cash outflow during the year        ($50,000)

a) $250,000 b) see in explanation column.

Explanation:

a)Cash Outflows for repayment of bonds  liabilities

Given

the starting  balance in bond payable account as $450,000

     Ending balance in bond payable account = $400.000

     Bonds issued at face value= $200,000

Cash outflow  for the repayment of bonds= Starting balance in bond payable account + Bonds issurd at face value Ending balance in bond payable account

Cash outflow  for the repayment of bonds($450,000+$200,000)-$400,000

                                                      = $250,000

STATEMENT OF ACCOUNT FOR CASH FLOWS ON FINANCIAL ACTIVITIES BY DIBA COMPANY  IN 2016

Financial Activities

Amount paid for repayment of bonds = $250,000

Amount received from insurance of bonds at face value = $200,000

Net cash from financial activities= $50,000

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