In preparing its cash flow statement for the year ended December 31, 2004, Giant Corporation collected the following data: Gain on sale of equipment $6,000 Proceeds from sale of equipment 10,000 Purchase of Zip Co. bonds for 180,000 (maturity value $200,000) Amortization of bond discount 2,000 Dividends paid (75,000) Proceeds from sale of Treasury stock 38,000 In its December 31, 2004, statement of cash flows, what amounts should Giant report as net cash used in investing activities and net cash used in financing activities?
CFI: 190,000 CFF: (37000)
Gain on sale of equipment $6,000 BACKS OUT OF CFO, IF LOSS, ADD BACK! Proceeds from sale of equipment 10,000 HITS CFI TO THE UPSIDE Purchase of Zip Co. bonds for 180,000 (maturity value $200,000) NOT SURE Amortization of bond discount 2,000 CFO ? Dividends paid (75,000) HITS CFF TO THE DOWNSIDE Proceeds from sale of Treasury stock 38,000 INFLOW TO CFF
Amortization of a bond discount should not be a cash flow.
kguizo Wrote: ------------------------------------------------------- > Amortization of a bond discount should not be a > cash flow. THX
CFI = 10 - 180 = -170 CFF = 38 - 75 = -37 what puzzled me was why the bond purchase as a CFI - thought it was a bond issuance therefore CFF until i read it was a Co. bond therefore a financing activities. thx guys for your quick reply.
bond purchase, means you have to pay the issuer. so its -ve CFI = -170 CFF = -75 + 38
Gain on sale of equipment $6,000 - adjustment to NI in the CFO indirect method, not considered here Proceeds from sale of equipment 10,000 - CFI inflow Purchase of Zip Co. bonds for 180,000 (maturity value $200,000) - CFI outflow Amortization of bond discount 2,000 - non-cash expense, adjustment to NI in the CFO indirect method, not considered here Dividends paid (75,000) - CFF outflow Proceeds from sale of Treasury stock 38,000 - CFF inflow CFI = 10-180 = - 170 CFF = -75+38 = -37