Company X paid Company Y $1.95 million for a new plant. During the same accounti

Question

Company X paid Company Y $1.95 million for a new plant. During the same accounting period, Company X experienced the following changes in its balance sheet: Cash decreased by $353,500, Accounts Receivable increased by $321,900, Inventory increased by $276,400, Property, Plant, and Equipment increased by $753,500, and Bonds Payable increased by $2 million. The net cash flow provided by financing activities is:

a)An outflow of $353,500.

b)An inflow of $753,500.

c)An inflow of $2 million.

d)An inflow of $1.95 million.

Explanation / Answer

Out of given, only increase of bonds payable should be reported as financing activity in cash flow statement.

Hence, increase of $ 2million of bonds payable will be the answer. Therefore, option c is correct.

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