Question

During Year 1, El Paso Company had the following changes in account balances: The Accumulated Depreciation account had a beginning balance of $65,000 and an ending balance of $91,000. The increase was due to depreciation expense. The Long-Term Notes Payable account had a beginning balance of $104,000 and an ending balance of $48,000. The decrease was due to repayment of debt. The Equipment Account had a beginning balance of $80,000 and an ending balance of $242,000. The increase was due to the purchase of other operational assets. The Long-Term Investments Account (Marketable Securities) had a beginning balance of $57,600 and an ending balance of $40,000. The decrease was due to the sale of investments at cost. The Dividends Payable account had a beginning balance of $38,400 and an ending balance of $32,000. There were $64,000 of dividends declared during the period. The Interest Payable account had a beginning balance of $7200 and an ending balance of $4000. The difference was due to the payment of interest. What is the net cash flow from financing activities? $70,400 inflow $56,000 outflow $126,400 outflow $56,000 inflow

Answer 1

Answer:

Net Cash Flow from Financing Activities is $126,400 Outflow.

Explanation:

Cash Flow from financing Activities:  

Repayment of Long term notes payable                          $(56,000)

Dividends Paid (Working 1)                                                  $(70,400)

Net Cash Flow from Financing Activities                           $(126,400)

 

Working 1  

Dividends Payable Beginning Balance                          $38,400  

Add: Dividends Declared during the year                          $64,000  

Less: Dividends Paid during the year (Balancing Figure) $(70,400)  

Dividends Payable Closing Balance                                  $32,000  

Please note that:

• Sale of Long term investments and Purchase of Other Operational assets relates to Investing Activities.
• Difference in Accumulated Depreciation and Interest Payable Accounts relates to Operating Activities.

*Figures in brackets represent negative values or outflows.