Question

Effect of Transactions on Cash Flows State the effect (cash receipt or cash payment and amount) of each of the following transactions, considered individually, on cash flows:

Retired $400,000 of bonds, on which there was $3,000 of unamortized discount, for $411,000.

Sold 20,000 shares of $5 par common stock for $22 per share.

Sold equipment with a book value of $55,800 for $60,000.

Purchased land for $650,000 cash.

Purchased a building by paying $50,000 cash and issuing a $450,000 mortgage note payable.

Sold a new issue of $500,000 of bonds at 98.

Purchased 10,000 shares of $10 par common stock as treasury stock at $33.25 per share.

Paid dividends of $1.50 per share. There were 1,000,000 shares issued and 120,000 shares of treasury stock.

Answer 1

effect	amount	working
a.retirement of bonds - cash payment	$411,000
b.sale of shares - cash receipt	$440,000	$22*20,000=>$440,000
c.sale of equipment - cash receipt	$60,000
d.purchase of land- cash payment	$650,000
e.purchase of building- cash payment	$50,000	note payable does not amount to cash payment
f.issue of bonds -cash receipt	$490,000	amount = 500,000*98%=>$490,000
g.purchase of treasury stock - cash payment	$332,500	10,000 shares *33.25=>332,500
h.dividends - cash payment	$1,320,000	(1,000,000-120,000)*1.50=>$1,320,000