28. Financing Activities Section. The following information is from the noncurre

Question

28. Financing Activities Section. The following information is from the noncurrent liabilities and owners' equity portions of Wolf Point, Inc.'s balance sheet. December 31 2017 2016 Long-term notes payable Bonds payable Common stock Retained earnings $350,000 54,000 350,000 880,000 260,000 87,000 410,000 720,000 The following activities occurred during 2017 Paid principal amount of $20,000 for long-term notes payable - Received $110,00o for long-term notes payable - Paid principal amount on bonds totaling $33,000 Repurchased common stock for $60,00oo cash - Earned net income totaling S200,000 - Paid cash dividends totaling S40,000 Required a. Prepare the financing activities section of the statement of cash flows for Wolf Point, Inc., for the year ended December 31, 2017. Use the format presented in Figure 12.7. b. How much cash was provided by (used by) financing activities? Briefly describe what this amount tells us about the company.

Explanation / Answer

a) Cash flow from financing activities: $ Principal payment for long-term notes payable -20000 Proceeds from long-term notes payable 110000 Principal payment for bonds -33000 Repurchase of common stock -60000 Payment of cash dividends -40000 Cash used by financing activites -43000 b) Cash used by financing activites is $43000. The company is more relayed on ousider's fund than equity fund. Here the negative cash flow from financing activities is because of repayment of debt fund and dividend payment. It indicates that the company has the ability to repay the debt fund, also the company is paying dividend to stockholders. Hence the negative cash flow from financing activites does not mean the company performance is bad.

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