The following information was drawn from the year-end balance sheets of White,Inc. $$\begin{array} { l r r }
& \text { Year } 2 & \text { Year } 1 \
\text { Bonds payable }& \$ 200,000 & \$275,000 \
\text { Common stock } & 112,500 & 87,500 \
\text { Treasury stock } & 17,500 & 12,500 \
\text { Retained earnings }& 35,000 & 27,500
\end{array}$$ White,Inc.,issued $30,000 in bonds during Year 2.The bonds were issued at face value.All bonds were retired at face value.What is the amount of cash outflow for the payment of bond liabilities?
A) $75,000
B) $25,000
C) $55,000
D) $105,000

Question

The following information was drawn from the year-end balance sheets of White,Inc. $$\begin{array} { l r r } 
 & \text { Year } 2 & \text { Year } 1 \
 \text { Bonds payable }& \$ 200,000 &  \$275,000 \
\text { Common stock } & 112,500 & 87,500 \
\text { Treasury stock } & 17,500 & 12,500 \
\text { Retained earnings }& 35,000 & 27,500
\end{array}$$ White,Inc.,issued $30,000 in bonds during Year 2.The bonds were issued at face value.All bonds were retired at face value.What is the amount of cash outflow for the payment of bond liabilities?
A) $75,000
B) $25,000
C) $55,000
D) $105,000

Quizplus · Accepted Answer

The cash outflow for the payment of bond liabilities is calculated by considering the net change in bonds payable, adjusted for new bonds issued. The bonds payable decreased from $275,000 in Year 1 to $200,000 in Year 2, a reduction of $75,000. However, since $30,000 in bonds were issued during Year 2, the total cash outflow for bond retirement is the reduction ($75,000) plus the new issuance ($30,000), totaling $105,000.

The Following Information Was Drawn from the Year-End Balance Sheets