Question

In preparation for developing its statement of cash flows for the year ended December 31, 2018, Millennium Solutions, Inc. collected the following information: ($ in millions) Payment for the early extinguishments of long-term notes (book value: $77.0 million) $ 81.0 Sale of common shares 228.0 Retirement of common shares 135.0 Loss on sale of equipment 3.3 Proceeds from sale of equipment 13.2 Issuance of short-term note payable for cash 23.0 Acquisition of building for cash 13.5 Purchase of marketable securities (not a cash equivalent) 18.0 Purchase of marketable securities (considered a cash equivalent) 14.0 Cash payment for 3-year insurance policy 16.0 Collection of note receivable with interest (principal amount, $24) 26.0 Declaration of cash dividends 58.0 Distribution of cash dividends declared in 2017 55.0 Required: 1. In Millennium’s statement of cash flows, what were net cash inflows (or outflows) from investing activities for 2018? 2. In Millennium’s statement of cash flows, what were net cash inflows (or outflows) from financing activities for 2018?

	($ in millions) Cash Flows From Investing Activities: Net cash inflows (outflows) from investing activities

	($ in millions) Cash Flows from Financing Activities: Net cash inflows (outflows) from financing activities

Answer 1

Solution:

($ in millions) Cash Flows From Investing Activities: Proceeds from sale of equipment $ 13.2 Acquisition of building for cash (13.5) Purchase of marketable securities (not a cash equivalent) (18.0) Collection of note receivable with interest (principal amount, $24) 24 Net cash inflows (outflows) from investing activities 5.7

	($ in millions) Cash Flows from Financing Activities: Payment for the early extinguishments of long-term notes (book value: $77.0 million) $ (81.0) Sale of common shares $ 228.0 Retirement of common shares $ (135) Issuance of short-term note payable for cash $ 23 Distribution of cash dividends declared in 2017 $ (55) Net cash inflows (outflows) from financing activities (20)

Notes:

1) Loss on sale of equipment is a part of operating activities.

2)Purchase of marketable securities ( cash equivalent) will lead to increase in cash and cash equivalents.

3) Cash payment for insurance policy is a cash flow from operating activity.

4)Declaration of cash dividend is a non cash event.

5) In Collection of notes receivable only principal part is taken in investing activity because interest part is considered as operating activity.