The following transactions were made by Ruby Inc. last year: Issuance of common stock $100,000 Dividends...

The following transactions were made by Ruby Inc. last year:

Issuance of common stock	$100,000
Dividends paid to the company's stockholders	2,000
Depreciation expense	6,000
Repayment of principal on bonds	40,000
Proceeds from sale of the company's used equipment	39,000
Purchase of land	230,000

Based solely on the above information, net cash flow from financing activities for the year on the statement of cash flows would be:

a.($67,000).

b.($150,000).

c.$29,000.

d.$58,000.

Solutions

Expert Solution

Cash Flow From Financing Activities

Issuance of Common Stock

Dividends paid to company's stockholders

Repayment of principal on bonds

100,000

(2,000)

(40,000)

Net cash flow from financing activities

$58,000

Explanations

1) Issuance of common stock is a cash inflow for the business pertaining to share capital. Share Capital forms a part of financing activity and therefore, it has been added to cash flow from financing activity.

2) Dividends are a cash outflow pertaining to the nature of shares. Therefore, it has been subtracted from cash flow from financing activity.

3) Depreciation pertains to assets. Assets do not form a part of financing activity and therefore, it has been ignored.

4) Repayment of principal on bonds is a cash outflow pertaining to long-term liabilities. Long-term liabilities form a part of financing activity and therefore, it has been subtracted from cash flow from financing activity.

5) Proceeds from sale of the company's used equipment pertains to assets. Therefore, it has been ignored

6) Purchase of land also pertains to assets and has been ignored.

Therefore, the answer is d.$58,000.

ekkarill92 answered 1 year ago

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