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Reporting Issuance and Retirement of Long-Term Debt On the basis of the details of the following...

Reporting Issuance and Retirement of Long-Term Debt

On the basis of the details of the following bonds payable and related discount accounts, indicate the items to be reported in the Financing Activities section of the statement of cash flows, assuming no gain or loss on retiring the bonds:

ACCOUNT Bonds Payable ACCOUNT NO.
Balance
Date Item Debit Credit Debit Credit
Jan. 1 Balance 530,000
Jan. 2 Retire bonds 106,000 424,000
June 30 Issue bonds 318,000 742,000
ACCOUNT Discount on Bond Payable ACCOUNT NO.
Balance
Date Item Debit Credit Debit Credit
Jan. 1 Balance 23,850
Jan. 2 Retire bonds 8,480 15,370
June 30 Issue bonds 21,300 36,670
Dec. 31 Amortize discount 1,830 34,840
Item Section of Statement of Cash Flows Added or Deducted Amount
Retire bonds $
Issue bonds $
Amortization of discount $

options are "added, deducted, report only"

options are "financing activites section, investing activites section, operating activities section, if indirect method used, seperate section"

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Answer #1

Solution

Item Section of Statement of Cash Flows Added or Deducted Amount
Retire bonds Financing activities section Deducted $ 97,520.00
Issue bonds Financing activities section Added $296,700.00
Amortization of discount operating activities section, if indirect method used Added $    1,830.00

Cash paid on retirement is Bonds payable face value minus unamortized discount.

Cash received on issue of Bonds payable is face value minus discount on bonds payable.

The amortization of discount is an expense but it is not a cash expense hence is it added to net income in operating section of cash flows.

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