Blair Madison Co.issues $2.8 million of new stock and pays $560,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $4.2 million in a new bond issue and paid off existing bonds with a face value of $5.6 million.The company bought 1,400 of another company's $1,000 bonds at a $280,000 premium.The net cash flow provided by financing activities is:

Question

Quizplus · Accepted Answer

Cash inflows from financing activities = Proceeds from issuance of stock − Payment of cash dividends + Proceeds from issuance of new bonds − Payment of interest on bonds
= $2,800,000 − $560,000 + $4,200,000 − $5,600,000 = $840,000
The purchase of another company's bonds is a cash outflow from investing activities.