Question

In: Accounting

Kollar Corp.’s transactions for the year ended December 31, Year 6, included the following: Purchased real...

Kollar Corp.’s transactions for the year ended December 31, Year 6, included the following:

Purchased real estate for $550,000 cash borrowed from a bank
Sold available-for-sale debt securities for $500,000
Paid dividends of $600,000
Issued 500 shares of common stock for $250,000

Purchased machinery and equipment for $125,000 cash
Paid $450,000 toward a bank loan
Reduced accounts receivable by $100,000
Increased accounts payable by $200,000

Kollar’s net cash used in financing activities for Year 6 was

A $450,000

B $500,000

C $250,000

D $50,000

Expert Solution

This is a question from preparation of Cash flow statements. And in this Cash flow statements , there are three types of activities namely.,

1.Operating Activities.

2.Investing Activities.

3.Financial Activities.

The Present question requires us to find net cash used in financing activities.

Formula will be :-

Net cash used in financing activities = Cash outflow of financing activities - Cash inflow of financing activities.

From the data given we will classify the items into different activities:-

Operating Activities:

Reduced accounts receivable by $100,000
Increased accounts payable by $200,000

Investing Activities:

Purchased machinery and equipment for $125,000 cash
Sold available-for-sale debt securities for $500,000

Financial Activities:

Purchased real estate for $550,000 cash borrowed from a bank
Paid dividends of $600,000
Issued 500 shares of common stock for $250,000
Paid $450,000 toward a bank loan.

From the activities coming under Financial Activities, we will calculate net cash used in financing activities, using the above mentioned formula:---

Cash outflow of financing activities:

Paid dividends = $600,000

Paid towards bank loan. = $450,000

Total outflow $1,050,000

Cash inflow of financing activities:

Purchased real estate,cash borrowed from a bank = $550,000

Issued 500 shares of common stock = $250,000

Total inflow $800,000

So, Net cash used in financing activities = $250,000

So, the correct option is(C)$250,000

ekkarill92 answered 2 days ago

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