Exercise-3 (Net cash provided/used by financing activities)
Posted in: Statement of cash flows (exercises)
Exercise-3 (a):
The following activities were performed by L&M corporation during the year 2015.
- Treasury stock purchased: $35,000
- Accounts payable paid: $585,000
- Note receivable collected: $50,000
- Dividends paid: $190,000
- Bonds payable issued: $340,000
- Common stock issued: $175,000
Required: Compute net cash provided/used by financing activities to be reported in the statement of cash flows of L&M corporation.
Solution:

Note: The following activities are not financing activities and have therefore not been included in the above computation:
- Payment of accounts payable.
- Collection of note receivable.
Exercise-3 (b):
Consider the following information of a company:
- Sale of common stock: $880,000
- Sale of preferred stock: $120,000
- Payment of dividends: $156,000
- Purchase of treasury stock: $965,000
Required: Compute net cash provided/used by financing activities using above information.
Solution:

*The payment of dividend is a financing activity under US-GAAP. For more details, read “financing activities section of statement of cash flows”.
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