Exhibit 22-2 The Rollins Corporation reported $11, 000 of net income for the current year.The following additional information relates to Rollins for the year:
$\begin{array}{ll}
\text {Subsidiary gain included in investment }\\text {income under the equity method}& \$ 370\
\text {Decrease in inventory}&80\
\text {Lose on disunsal of eauirment}&900\
\text { Proceeds from disposal of equipment } & 1,400 \
\text { Depreciation expense } & 1,200 \
\text { Acquisition of treasury stock } & 650 \
\text { Increase in ac counts payable } & 290 \
\text { Acquisition of new securities (accounted for using the } &\
\text { ecquity method) } & 500 \
\text { Decrease in deferred income taxes } & 210 \
\text { Early retirement of bonds payable at book value } & 1,000 \
\text { Increace in interect receivahle } & 3 n
\end{array}$

-Refer to Exhibit 22-2.What is Rollins' net cash used ( )by financing activities?

Question

Exhibit 22-2 The Rollins Corporation reported $11, 000 of net income for the current year.The following additional information relates to Rollins for the year:
$\begin{array}{ll}
\text {Subsidiary gain included in investment }\\text {income under the equity method}& \$ 370\
\text {Decrease in inventory}&80\
\text {Lose on disunsal of eauirment}&900\
\text { Proceeds from disposal of equipment } & 1,400 \
\text { Depreciation expense } & 1,200 \
\text { Acquisition of treasury stock } & 650 \
\text { Increase in ac counts payable } & 290 \
\text { Acquisition of new securities (accounted for using the } &\
\text { ecquity method) } & 500 \
\text { Decrease in deferred income taxes } & 210 \
\text { Early retirement of bonds payable at book value } & 1,000 \
\text { Increace in interect receivahle } & 3 n
\end{array}$

-Refer to Exhibit 22-2.What is Rollins' net cash used ( )by financing activities?

Quizplus · Accepted Answer

To calculate the net cash used by financing activities, we need to look at the changes in long-term liabilities, stockholder's equity, and dividends paid.

From the exhibit, we can see that long-term borrowing increased by $800 and dividends paid was $1,850. However, we do not have information on any new stock issuance or treasury stock transactions.

To calculate the change in stockholder's equity, we can use the formula:

Ending SE = Beginning SE + Net Income - Dividends Paid

Plugging in the numbers from the exhibit, we get:

Ending SE = $40,000 + $11,000 - $1,850 = $49,150

Therefore, the change in SE is:

SE Ending - SE Beginning = $49,150 - $40,000 = $9,150

Now we can calculate the net cash used by financing activities:

Net cash used by financing = Increase in long-term borrowing + Change in stockholder's equity - Dividends paid

Net cash used by financing = $800 + $9,150 - $1,850 = -$1,650

The negative sign indicates that cash was provided, rather than used, by financing activities. Therefore, the correct answer is B) $(1,650).

Exhibit 22-2 the Rollins Corporation Reported $11, 000 of Net