Question

Please review the following and see my question way below.

Apollo Corporation's most recent balance sheet appears below:

Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$34	$29
Accounts receivable	32	36
Inventory	53	66
Property, plant and equipment	554	480
Less accumulated depreciation	208	206
Total assets	$465	$405
Liabilities and stockholders’ equity:
Accounts payable	$41	$50
Accrued liabilities	17	16
Income taxes payable	28	30
Bonds payable	217	200
Common stock	75	70
Retained earnings	87	39
Total liabilities and equity	$465	$405

Net income for the year was $60. Cash dividends were $12. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows.

The net cash provided by (used in) financing activities for the year is given as 10.

A.

$10

B.

$5

C.

($12)

D.

$17

Financing activities:
Issuance of bonds payable ($217 – $200)	$17
Issuance of common stock ($75 – $70)	5
Paying a dividend	(12)
Net cash provided by (used in) financing activities	$10

Question:-The balance sheet has bonds payable ending balance as 217 beginning balance 200. Net income for the year was $60. Cash dividends were $12. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) financing activities for the year has been given as 10 from Multiple Choices $10, $5, $(12), and $17. Why are the issue proceeds of bond payable used to calculate net cash provided from financing activities while we are told in the notes no bonds payable were issued? OR how did they come up with the 17, while no bonds payable were issued in the period? Thanks.

Answer 1

Beginning balance of bonds was $200 and ending balance is $217. There is clearly escalation of bonds of $17.

Whenever there is change in the long term debts then it should be duly noted in cash flow statement. Also, here nothing is mentioned of sort that bonds were issued for purchase of another asset. So, here we will assume the statement given in the question " no bonds payable were issued" was meant to say that no bonds were issued for purchase of another asset.

From the balance sheet we can make out that there clearly is an increase of $17.

So, now this gives us with one possibility only i.e. bonds were issued for cash. Thus there will be increase in cash for $17.