CFA Practice Question

CFA Practice Question

In preparing its cash flow statement for the year ended December 31, 2008, Roman Co. collected the following data:

Gain on sale of equipment: $6,000
Proceeds from sale of equipment: 10,000
Purchase of A.S. Inc. bonds (par value $200,000): 180,000
Amortization of bond discount: 2,000
Dividends declared: 45,000
Dividends paid: 38,000
Proceeds from sale of treasury stock (carrying amount of $65,000): 75,000

In its December 31, 2008 statement of cash flows, what amount should Roman report as net cash provided by financing activities?
A. $27,000
B. $30,000
C. $37,000
Explanation: Financing activities include the issuance and repurchase of shares, dividends paid and changes in long-term liabilities. In this case, there were dividends paid of $38,000 and proceeds from sale of treasury stock of $75,000. Therefore, the net cash provided from financing activities is $37,000 ($75,000-38,000).

User Contributed Comments 6

User Comment
ontrack isn't purchase and sale of bonds a financial cash flow?
cjyoung316 The purchase of bonds of another company is an investing cash outflow
adansaenz what about the amortization of bond discount($2000)??
aravinda I think that would be a CFO
davcer for a discount bond, interest expense includes amortization of the discount, CFO
tijean25 Amortization is a non cash item that does not factor into reconciliation of cash flow
You need to log in first to add your comment.