Bonds with a face value of $300,000 are issued at 101.The statement of cash flows would report a cash inflow of:
A)$300,000 in the financing activities section.
B)$303,000 in the financing activities section.
C)$3,000 in the financing activities section.
D)$300,000 in the investing activities section.

Question

Quizplus · Accepted Answer

When bonds are issued at a price above their face value, the difference between the face value and the issue price is called the premium. In this case, the bonds are issued at 101, which means they are issued at a premium of 1% or $3,000 (0.01 x $300,000 = $3,000). Therefore, the statement of cash flows would report a cash inflow of $303,000 ($300,000 from the issuance of the bonds, and $3,000 from the premium received) in the financing activities section.

Bonds with a Face Value of $300,000 Are Issued at 101.The