Question

The differences in Sanaol's balance sheet at December 31,2010 and 2009 are presented below:

Increase

(decrease)

Assets

Cash and cash equivalents 120,000

Available -for-sale securities 300,000

Inventory 80,000

Long-term Investments -100,000

Plant Asset 700,000

Accumulated Deprecation 0

TOTAL 1,100,000

Liabilities and Stockholders Equity

Accounts payable and accrued liabilities -5,000

Dividends payable 160,000

Short-term bank debt 325,000

Long-term debt 110,000

Common stock, 10 par 100,000

Additional paid-in capital 120,000

Retained earnings 290,000

TOTAL 1,100,000

The following information relates to 2010

*Net Income was 790,000

* Cash dividends of 500,000 were declared

* Building costing 600,000and having a carrying amount of 350,000was sold for 350,000

*Equipment costing 110,000 was acquired through issuance of long -term debt

*A long-term investment was sold for 135,000

There were no other transactions affecting long- term investments

* 10,000 shares of common stock were issued for 22 a share

In Sanaol's 2010 statement of cash flows . Net cash provided by financing activities was?

a.) 205,000

b.) 150,000

c.) 45,000

d.) 20,000

Answer 1

Option a] is Correct, $ 205,000,

Note-

The long term debts has been issued for acquisition of equipment, hence it is not part of cash flow.

The increase in dividend payable represents that company has not paid dividend to the extent of this amount.Hence the amount paid by the company is (500000-160000) $ 340000.

Short term bad debts is a fiancing activities.

Please comment for any explanation,

Thanks,