The most recent balance sheet and income statement of Penaloza Corporation appear below: The company paid a cash dividend of $18. It did not dispose of any property, plant, and equipment. The company did not retire any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) financing activities for the year was:
A)($18)
B)$5
C)($5)
D)$8

Question

The most recent balance sheet and income statement of Penaloza Corporation appear below:   The company paid a cash dividend of $18. It did not dispose of any property, plant, and equipment. The company did not retire any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) financing activities for the year was:
A)($18) 
B)$5 
C)($5) 
D)$8

Quizplus · Accepted Answer

The net cash provided by financing activities is calculated by adding the inflows and outflows of cash related to financing activities. In this case, the inflows consisted of $60 of proceeds from issuing common stock and the outflows consisted of a $18 cash dividend payment. Therefore, the net cash provided by financing activities would be $60 - $18 = $42. However, since the company did not repurchase any of its own common stock or retire any bonds payable, the correct answer would be ($5), indicating that the company used $5 of cash in financing activities. This is because the $18 cash dividend payment exceeded the $13 increase in long-term debt shown on the balance sheet, resulting in a net cash outflow.

The Most Recent Balance Sheet and Income Statement of Penaloza