Question

A company reported that its bonds with a par value of $50,000 and a carrying value of $67,000 are retired for $72,000 cash, resulting in a loss of $5,000. The amount to be reported under cash flows from financing activities is:

Answer 1

The amount to be reported under cash flows from financing activities is the cash received from the retirement of bonds.

Step-by-step explanation:

The amount to be reported under cash flows from financing activities is the cash received from the retirement of bonds. In this case, the company received $72,000 cash from the bond retirement. Despite the company experiencing a loss of $5,000, this loss does not affect the amount reported under cash flows from financing activities. The loss is reported separately as a non-operating expense in the income statement.

Answer 2

The amount reported under cash flows from financing activities is ($72,000). The Option B.

Cash flow from financing activities means the section of a company's cash flow statement which shows the net flows of cash that are used to fund the company.

We will only consider the cash received from the retirement of bonds to calculate the amount to be reported under cash flows from financing activities.

The company paid $72,000 in cash. As they paid only $72,000 in cash, this will be the actual outflow.

Therefore, the amount to be reported under cash flows from financing activities is ($72,000).

The full question is:

A company reported that its bonds with a par value of $50,000 and a carrying value of $67,000 are retired for $72,000 cash, resulting in a loss of $5,000. The amount to be reported under cash flows from financing activities is:

a. $17,000

b. $(72,000)

c. $(17,000)

d. $(5,000)

e. $(67,000)