The Laurel Company reported the following data for last year: Based solely on this information, the net cash flows from financing activities on the statement of cash flows would be
A) $2,000.
B) $(30,000).
C) $(60,000).
D) $(8,000).

Question

The Laurel Company reported the following data for last year:  Based solely on this information, the net cash flows from financing activities on the statement of cash flows would be
A) $2,000. 
B) $(30,000). 
C) $(60,000). 
D) $(8,000).

Quizplus · Accepted Answer

Based on the information given in the question, we know that the net increase in long-term debt for the year was $50,000, and the payment of dividends was $10,000. To calculate the net cash flows from financing activities, we need to subtract the payment of dividends from the increase in long-term debt. Therefore:
Net cash flows from financing activities = $50,000 - $10,000 = $40,000
However, this is a net increase in cash flows from financing activities. From the perspective of the statement of cash flows, this represents an outflow of cash, as the company has received more cash from long-term borrowing than it has paid out in dividends. Therefore, we need to express this as a negative number:
Net cash flows from financing activities = -$40,000 = $(60,000)

The Laurel Company Reported the Following Data for Last Year