Question

During the year, Munster Company sold common stock for $50 million, paid dividends of $5 million, and repaid its bonds payable with a face amount of $30 million. In its statement of cash flows, Munster will report net cash flows from financing activities of:

1) $15 million
2) $25 million
3) $45 million
4) $75 million

Answer 1

The net cash flows from financing activities for Munster Company reported in the statement of cash flows is $15 million, calculated by subtracting the cash outflows for dividends and bond repayments from the cash inflows from issuing stock.

Step-by-step explanation:

The question relates to the calculation of net cash flows from financing activities for Munster Company as presented in the statement of cash flows. To calculate this, we need to consider all the cash flows related to financing transactions. Munster Company sold common stock generating $50 million in cash inflows, paid dividends amounting to $5 million which represent cash outflows, and repaid bonds payable with a face amount of $30 million, another cash outflow.

The net cash flow from financing activities is thus calculated as follows:

• Cash from issuing stock: +$50 million
• Cash used to pay dividends: -$5 million
• Cash used to repay bonds: -$30 million

By summing the cash inflows and outflows: $50 million - $5 million - $30 million, we get a net cash flow from financing activities of $15 million.