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During 2017, Paxon Corporation’s long-term investments account (at cost) increased $15,000, which was the net result of purchasing stocks costing $80,000 and selling stocks costing $65,000 at a $6,000 loss. Also, its bonds payable account decreased $40,000, the net result of issuing $100,000 of bonds at $103,000 and retiring bonds with a face value (and book value) of $140,000 at a $9,000 gain. What items and amounts appear in the (a) cash flows from investing activities and (b) cash flows from financing activities sections of its 2017 statement of cash flows?

Use negative signs with answers, when appropriate.

Cash flows from investing activities
Purchase of stock investments $Answer
Sale of stock investments $Answer
Cash flows from financing activities
Issuance of bonds $Answer
Retirement of bonds $Answer

Respuesta :

Answer:

Cash flows from investing activities

Purchase of stock investments  -$80,000

Sale of stock investments $59,000

Cash flows from financing activities

Issuance of bonds $Answer  $103,000

Retirement of bonds $Answer -$131,000

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.  

So,

(a) Cash flows from investing activities

Purchase of stock investments            -$80,000

Sale of stock investments                      $59,000   ($65,000 - $6,000)

(b) Cash flows from financing activities

Issuance of bonds                                  $103,000

Retirement of bonds                              -$131,000  ($140,000 - $9,000)

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