Financing activities

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    Topic
  • #195971
    xmas
    Member

    During year 2, Teb, Inc. had the following activities related to its financial operations:

    Payment for the early retirement of long-term bonds payable (carrying value $740,000) $750,000

    Distribution in year 2 of cash dividend declared in year 1 to preferred shareholders 62,000

    Carrying value of convertible preferred stock in Teb, converted into common shares 120,000

    Proceeds from sale of treasury stock (carrying value at cost, $86,000) 95,000

    In Teb’s year 2 statement of cash flows, net cash used in financing activities should be

    A. $716,000

    B. $597,000

    C. $535,000

    D. $717,000

    The answer given is $717k… Not sure I understand.

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  • #686545
    sdguy
    Participant

    Minus $750K in bond repayment

    Minus $62K in dividend distribution

    Plus $95K in sale of stock

    -750-62+95 = (717)K cash used for financing activities

    The preferred to common is a non-cash transaction.

    AUD: 83
    FAR: 77
    REG: 86
    BEC: 86

    #686546
    sdguy
    Participant

    You're welcome

    AUD: 83
    FAR: 77
    REG: 86
    BEC: 86

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