On the basis of the following stockholders' equity accounts, indicate the items, exclusive of net income, to be reported on the statement of cash flows. There were no unpaid dividends at either the beginning or the end of the year.
|ACCOUNT - Common Stock, $40 par||ACCOUNT No.|
|Jan. 1||Balance, 120,000 shares||4,800,000|
|Apr. 2||30,000 shares issued for cash||1,200,000||6,000,000|
|June 30||4,400 share stock dividend||176,000|
|ACCOUNT - Paid-In Capital in Excess of Par - Common Stock||ACCOUNT No.|
|Apr. 2||30,000 shares issued for cash||720,000||1,080,000|
|June 30||Stock dividend||114,000||6,176,000|
|ACCOUNT - Retained Earnings||ACCOUNT No.|
|June 30||Stock dividend||290,440||1,709,560|
|Dec. 30||Cash Dividend||463,200||1,246,360|
|Dec. 31||Net income||1,440,000|
Statement of Cash Flow:
The statement of cash flow includes the consolidation of the last two balance sheets and the most recent income statement to calculate the changes in cash balances over two periods.
Answer and Explanation:
The financing activities section of the statement of cash flow reports the changes in the last two balance sheets for non-current liabilities and equity sections. The statement determines how the company finances its operations and returns investments to shareholders.
For the problem below the issuance of 300,000 shares of common stock and related paid-in capital would be included in the financing section of the cash flow statement as a cash inflow. Likewise, the cash dividend would be included in the financing section as a cash use. The stock dividend would only be a note as additional information on the cash flow statement because it did not include a cash transaction; only a stock transaction.
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from Accounting 101: Financial AccountingChapter 12 / Lesson 5