Question

The following data are available for Something Strange! Increase in accounts payable $40,000 Increase in bonds payable 100,000 Sale of investment 50,000 Issuance of common stock 60,000 Payment of cash dividends 30,000 Net cash provided by financing activities is a. $130,000 b. $170,000. c. $90,000. d. $160,000.

Answer 1

To find the net cash provided by financing activities, we will consider each transaction:

1. Increase in accounts payable: This indicates a liability increase, which means the company has not paid this cash out, so it increases cash flow.
Cash inflow: $40,000

2. Increase in bonds payable: This also indicates a liability increase, representing a cash inflow because the company borrowed funds.
Cash inflow: $100,000

3. Sale of investment: This is an investing activity, not a financing activity. So, we don't consider it here.

4. Issuance of common stock: This means the company issued stock and received cash.
Cash inflow: $60,000

5. Payment of cash dividends: This is a cash outflow as the company is paying its shareholders.
Cash outflow: $30,000

Now, summing up the cash inflows and outflows:
Total inflow: $40,000 + $100,000 + $60,000 = $200,000
Total outflow: $30,000

Net cash provided by financing activities = Total inflow - Total outflow
= $200,000 - $30,000
= $170,000

The correct answer is:
b. $170,000.