Question

The following information was drawn from the year-end balance sheets of Fox River, Inc.:

Account Title	Year 2				Year 1
Bonds payable	$	685,000			$	1,035,000
Common stock		213,000				140,000
Treasury stock		31,500				12,000
Retained earnings		86,300				68,400

Additional information regarding transactions occurring during Year 2:

1. Fox River, Inc. issued $49,000 of bonds during Year 2. The bonds were issued at face value. All bonds retired were retired at face value.
2. Common stock did not have a par value.
3. Fox River, Inc. uses the cost method to account for treasury stock.
4. The amount of net income shown on the Year 2 income statement was $35,400.

Required
a. Determine the amount of cash flow for the retirement of bonds that should appear on the Year 2 statement of cash flows.
b. Determine the amount of cash flow from the issue of common stock that should appear on the Year 2 statement of cash flows.
c. Determine the amount of cash flow for the purchase of treasury stock that should appear on the Year 2 statement of cash flows.
d. Determine the amount of cash flow for the payment of dividends that should appear on the Year 2 statement of cash flows.

	a. Cash flow for the retirement of bonds b. Cash flow from the issue of common stock c. Cash flow for the purchase of treasury stock d. Cash flow for the payment of dividends

e. Prepare the financing activities section of the Year 2 statement of cash flows. (Amounts to be deducted should be indicated with a minus sign.)

	Cash flows from financing activities: Net cash flow from financing activities

Answer 1

a.	Cash flow for the retirement of bonds (1035000+49000-685000)	$   399,000
b.	Cash flow from the issue of common stock (213000-140000)	$     73,000
c.	Cash flow for the purchase of treasury stock (31500-12000)	$     19,500
d.	Cash flow for the payment of dividends (68400+35400-86300)	$     17,500

2.

Cash flows from financing activities:
Cash received from issuance of bond	$       49,000
Cash paid to retire bonds	$ (399,000)
Cash received from issuance of stock	$       73,000
Cash paid to acquire treasury stcok	$    (19,500)
Cash paid for dividends	$    (17,500)
Net cash used by investing activities	$ (314,000)

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