A company reported that its bonds with a par value of $50,000 and a carrying amount of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:
A) $(3,000).
B) $(60,000).
C) $(57,000).
D) Zero. This is an operating activity.
E) Zero. This is an investing activity.

Question

Quizplus · Accepted Answer

The amount of cash received from the retirement of bonds is reported under financing activities in the statement of cash flows. The loss on retirement of bonds is also reported as an outflow of cash under financing activities. Therefore, the net cash outflow of $3,000 ($60,000 cash received - $57,000 carrying amount) is reported as a financing activity of $60,000 cash received and $57,000 carrying amount, resulting in a loss of $3,000, which is reported as an outflow of cash under financing activities.

A Company Reported That Its Bonds with a Par Value