Question

Blair Madison Co. issues $2.8 million of new stock and pays $560,000 in cash dividends during the year. In addition, the company took advantage of falling interest rates to borrow $4.2 million in a new bond issue and paid off existing bonds with a face value of $5.6 million. The company bought 1,400 of another company's $1,000 bonds at a $280,000 premium. The net cash flow provided by financing activities is:

Answer 1

The net cash flow provided by financing activities is: $840,000

Step-by-step explanation:

Prepare the Cash flow from Financing Activities Section as follows :

Cash flow from Financing Activities

Proceeds from Issue of Shares $2,800,000

Dividends Paid ($560,000)

New Bond Issue $4,200,000

Bond Paid off ($5,600,000)

Net Cash flow from Financing Activities $840,000

Note that the Bonds bought of another company constitutes investment activities of Blair Madison Co. thus excluded from Cash Flow from Financing Activities Calculation.