Café Creations Inc. has net cash flow from financing activities for the last year of $25 million. The company paid $15 million in dividends last year. During the year, the change in notes payable on the balance sheet was a decrease of $40 million, and change in common and preferred stock was an increase of $50 million. The end of year balance for long-term debt was $40 million. What was their beginning of year balance for long-term debt?
A) $10 million
B) $20 million
C) $30 million
D) $40 million

Question

Quizplus · Accepted Answer

The beginning of year balance for long-term debt is $10 million. This is calculated by taking the ending balance of long-term debt ($40 million) and subtracting the net cash flow from financing activities ($25 million) and the change in notes payable ($40 million). The result is then added to the change in common and preferred stock ($50 million) and the dividends paid ($15 million).