In preparing its cash flow statement for the year ended December 31, Reve Co. collected the following data:
Gain on sale of equipment $ (6,000)
Proceeds from sale of equipment 10,000
Purchase of A.S., Inc. bonds (par value $200,000) (180,000)
Amortization of bond discount 2,000
Dividends declared (45,000)
Dividends paid (38,000)
Proceeds from sale of treasury stock (carrying amount $65,000)
In its December 31, statement of cash flows, what amount should Reve report as net cash provided by financing activities?
a. $30,000
b. $27,000
c. $37,000
d. $20,000
Explanation
Cash provided by financing activities:
Dividends paid $ (38,000)
Proceeds from sale of treasury stock 75,000
Net cash provided by financing activities $ 37,000
Choice "c" is correct. $37,000. Financing activities include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed. Dividends paid, not dividends declared, should be included as an outflow of cash from financing activities.
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