Exercise-3: Net cash provided/used by financing activities

By: Rashid Javed | Updated on: February 1st, 2024

Learning objective:
This exercise illustrates the computation of cash provided (or used) by financing activities and its reporting on the statement of cash flows.

Exercise-3 (a):

The following activities were performed by L&M Corporation during the year 2023.

  • 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 the net cash provided (or used) by financing activities to be reported on the statement of cash flows of L&M Corporation.


Net cash provided by financing activities - L&M Company

Note: The following activities are not financing activities and have, therefore, not been included in the above computation:

  1. Payment to accounts payable.
  2. Collection of note receivable.

Exercise-3 (b):

Consider the following information of Ethnic 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 the net cash provided (or used) by financing activities using above information.


Net cash used by financing activities - Ethnic Company

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

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