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Chapter 5: Q15BE. (page 240)

Use the information presented in BE5-14 for Martinez Corporation to compute the net cash used (provided) by financing activities.

BE5-14 (L05) Martinez Corporation engaged in the following cash transactions during 2017.

Sale of land and building $191,000

Purchase of treasury stock 40,000

Purchase of land 37,000

Payment of cash dividend 95,000

Purchase of equipment 53,000

Issuance of common stock 147,000

Retirement of bonds 100,000

Compute the net cash provided (used) by investing activities.

Short Answer

Expert verified

The cash used in financing activities is equal to$88,000.

Step by step solution

01

Definition of Financing Activities

The capital generates activities that include the issue of securities, either debt or equity, which are considered financing activities. It also provides for the redemption of securities issued.

02

Financing Activities

Particular

Amount $

Purchase of treasury stock

($40,000)

Payment of cash dividend

(95,000)

Issuance of common stock

147,000

Retirement of bonds

(100,000)

Cash used in financing activities

($88,000)

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Most popular questions from this chapter

BE5-2 (L03) Koch Corporation鈥檚 adjusted trial balance contained the following asset accounts at December 31, 2017: Cash \(7,000, Land \)40,000, Patents \(12,500, Accounts Receivable \)90,000, Prepaid Insurance \(5,200, Inventory \)30,000, Allowance for Doubtful Accounts \(4,000, and Equity Investments (trading) \)11,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.

What is meant by liquidity? Rank the following assets from one to five in order of liquidity.

(a) Goodwill.

(b) Inventory.

(c) Buildings.

(d) Short-term investments.

(e) Accounts receivable.

Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31.

2017

2016

Cash

\(177,000

\)78,000

Accounts receivables

180,000

185,000

Investment

52,000

74,000

Equipment

298,000

240,000

Accumulated depreciation

(106,000)

(89,000)

Current liabilities

134,000

151,000

Common stock

160,000

160,000

Retained earnings

307,000

177,000

Additional information:

Investments were sold at a loss of \(10,000; no equipment was sold; cash dividends paid were \)30,000; and net income was $160,000.

Instructions

(a) Prepare a statement of cash flows for 2017 for Zubin Mehta Corporation.

(b) Determine Zubin Mehta Corporation鈥檚 free cash flow.

According to generally accepted accounting principles, what is the balance sheet valuation of each of the following assets?

(a) Trade accounts receivable.

(b) Land.

(c) Inventories.

(d) Trading securities (common stock of other companies).

(e) Prepaid expenses.

Sergey Co. has net cash provided by operating activities of \(1,200,000. Its average current liabilities for the period are \)1,000,000, and its average total liabilities are $1,500,000. Comment on the company鈥檚 liquidity and financial flexibility, given this information.
See all solutions

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