Oklahoma Corp.uses the indirect method to prepare its statement of cash flows.Refer to the following information for 2018: 1.Long-Term Notes Payable,beginning balance,$85,000
2)Long-Term Notes Payable,ending balance,$75,000
3)Common Stock,beginning balance,$3000
4)Common Stock,ending balance,$28,000
5)Retained Earnings,beginning balance,$76,000
6)Retained Earnings,ending balance,$118,000
7)Treasury Stock,beginning balance,$5500
8)Treasury Stock,ending balance,$10,100
9)No stock was retired.
10)No treasury stock was sold.
11)During 2018,the company repaid $35,000 of long-term notes payable.
12)During 2018,the company borrowed $25,000 on new long-term notes payable.
13)Net income for the year was $49,000.
14)Assume all dividends declared during the year were paid.
What is the net cash provided by financing activities?
A) $20,400
B) $13,400
C) ($10,000)
D) $3400

Question

Quizplus · Accepted Answer

The net cash provided by financing activities is calculated by considering changes in long-term notes payable, common stock, treasury stock, and dividends paid. The decrease in long-term notes payable (after accounting for the repayment and new borrowing) is $10,000 ($85,000 - $75,000), indicating $10,000 net repayment. The increase in common stock is $25,000 ($28,000 - $3,000), indicating cash received from issuing stock. The increase in treasury stock is $4,600 ($10,100 - $5,500), which is cash used to buy back stock. Dividends paid can be calculated from the change in retained earnings adjusted for net income: $76,000 + $49,000 (net income) - $118,000 = $7,000 paid in dividends. Therefore, the net cash provided by financing activities is $25,000 (from issuing stock) - $10,000 (repayment of notes) - $4,600 (buyback of treasury stock) - $7,000 (dividends paid) = $3,400.