Question

Jones Industries received $600,000 from issuing shares of its common stock and $400,000 from issuing bonds. During the year, Jones Industries also paid dividends of $60,000. How are the effects of these transactions reported on the statement of cash flows? Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required. If a transaction has no effect on the statement of cash flows, select "No effect" from the drop down menu and leave the amount box blank.

Answer 1

Answer: Please refer to Explanation

Explanation:

All these transactions belong to the Financing Section of the Cash Flow statement. This section deals with cash inflows and outflows resulting from debt issuance, dividend payments and share issuance or repurchase.

The following shows how the above transactions are to be recorded,

Cash Received from Issuing Common Stock = Cash flows from Financing Activities = $600,000

Cash received from Issuing Bonds = Cash flows from Financing Activities = $400,000

Cash Paid for Dividends = Cash flows from Financing Activities = -$60,000

Minis signs are to be used to indicate cash outflows, cash payments and decreases in cash hence the dividends being -$60,000.