Question 8 The following T-account is a summary of the cash account of Kemper Co

Question

Question 8

The following T-account is a summary of the cash account of Kemper Company.

Cash (Summary Form)

6,790

359,020

216,880

7,730

137,690

40,040

14,740

6,200

399,090

77,930

359,230

What amount of net cash provided (used) by financing activities should be reported in the statement of cash flows?

Cash (Summary Form)

Balance, Jan. 1

6,790

Receipts from customers

359,020

Payments for goods

216,880

Dividends on stock investments

7,730

Payments for operating expenses

137,690

Proceeds from sale of equipment

40,040

Interest paid

14,740

Proceeds from issuance of Taxes paid

6,200

    bonds payable

399,090

Dividends paid

77,930

Balance, Dec. 31

359,230

Explanation / Answer

Cash inflow from financing activities = Proceeds from bond issue = $399,090

Cash outflow from financing activities = Dividend paid + Interest paid** = $(77,930 + 14,740) = $92,670

Net cash inflow (Cash provided) by financing activities = $(399,090 - 92,670) = $306,420

**You didn't mention if IFRS or US-GAAP is used. Under IFRS, Interest paid can be classified under financing (or operating) activities. But under GAAP, interest paid is Operating cash flow. So, if US GAAP is used,

Net cash inflow (Cash provided) by financiang activities = $(399,090 - 77,930) = $321,160

Also, we have considered interest paid under financing (and not operating) activities under IFRS.

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