Question

Selected data for Kris Corporation’s comparative balance sheets for Year 1 and Year 2 are as follows:

		Year 1				Year 2
Assets
Cash		$	100,000			$	(50,000)
Accounts receivable (net)			50,000				100,000
Inventory			100,000				250,000
Equipment (net)			300,000				350,000
Total assets		$	550,000			$	650,000
Liabilities and Equity
Accounts payable		$	150,000				100,000
Income taxes payable			80,000				30,000
Bonds payable			100,000				80,000
Common stock			100,000				200,000
Retained earnings			120,000				240,000
Total liabilities and Equity		$	550,000			$	650,000

The change in the balance of the Bonds Payable account would be recorded on the statement of cash flows as:

A) an increase of $20,000 under financing activities.

B) an increase of $80,000 under investing activities.

C) a decrease of $20,000 under financing activities.

D) a decrease of $80,000 under operating activities.

Answer 1

Balance of bonds payable in year 1 = 100000

Balance of bonds payable in year 2 = 80000

Decrease in bonds payble balance = 20000 (100000-80000)

Decrease in balance of bonds payable will be recorded on the statement of cash flow as a decrease of $20000 under financing activities.