Question

Investing and Financing Cash Flows During the year, Paxon Corporation's Long-Term Investments account (at cost) increased $15,000, the net result of purchasing stocks costing $80,000 and selling stocks costing $65,000 at a $6,000 loss. Also, the Bonds Payable account decreased by $40,000, the net result of issuing $110,000 of bonds at 103 and retiring bonds with a face value (and book value) of $150,000 at a $9,000 gain. What items and amounts will appear in the

(a) cash flows from investing activities and the

(b) cash flows from financing activities sections of Paxon's statement of cash flows?

Use a negative sign with cash outflow answers.

a. Cash flow from investing activities will show Purchase of Stock Investments Answer

Sale of Stock Investments Answer

b. Cash flow from financing activities will show Issuance of Bonds Answer

Retirement of Bonds Answer

Answer 1

Cost of Stock Investments sold = $65,000

Loss on sale of stock investment = $6,000

Cash inflow from Sale of Stock Investments = Cost of Stock Investments sold - Loss on sale of stock investment

= 65,000 - 6,000

= $59,000

Bonds of face value $110,000 were issued at 103.

Cash received from issue of bonds = 110,000 x 103

= $113,300

Bonds with a face value (and book value) of $150,000 were retired at a $9,000 gain.

Cash paid for retirement of bonds = 150,000 - 9,000

= $141,000

a. Cash flow from investing activities will show

Purchase of Stock Investments = - $80,000

Sale of Stock Investments = $59,000

b. Cash flow from financing activities will show

Issuance of Bonds = $113,300

Retirement of Bonds = - $141,000