A company reported that its bonds with a face value of $50,000 and a carrying value of $53,000 are retired for $56,000 cash.The amount to be reported under cash flows from financing activities is:
A) ($53,000).
B) ($3,000).
C) ($56,000)
D) $0; this is an operating activity.

Question

Quizplus · Accepted Answer

The retirement of bonds for cash is a financing activity. The company received cash of $56,000 for retiring the bonds. The difference between the cash received and the carrying value of the bonds ($3,000) represents a gain on retirement of debt, which would be reported as a separate item on the statement of cash flows. Therefore, the amount to be reported under cash flows from financing activities is the cash received, which is $56,000.

A Company Reported That Its Bonds with a Face Value