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3 January, 04:18

State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash flows:

a. Sold equipment with a book value of $78,000 for $94,000.

b. Sold a new issue of $250,000 of bonds at 102.

c. Retired $400,000 of bonds, on which there was $4,000 of unamortized discount, for $475,000.

d. Purchased 3,000 shares of $30 par common stock as treasury stock at $40 per share.

e. Sold 4,000 shares of $25 par common stock for $50 per share.

f. Paid dividends of $1.50 per share. There were 40,000 shares issued and 5,000 shares of treasury stock.

g. Purchased land for $287,000 cash.

h. Purchased a building by paying $60,000 cash and issuing a $50,000 mortgage note payable.

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  1. 3 January, 04:20
    0
    The answer is:

    A - Cash receipt $94,000.

    B - Cash receipt $255,000

    C - Cash payment $475,000

    D - Cash payment $120,000

    E - Cash receipt $200,000

    F - Cash payment. $52,500

    G - Cash payment. $287,000

    H - Cash payment. $60,000

    Explanation:

    A - Cash receipt $94,000. $94,000 was collected for the sale of equipment

    B - Cash receipt $255,000. At 102 percent means it increased by 2 percent. 102% x $250,000 equals $255,000

    C - Cash payment $475,000. The bond was retired i. e the bond issuer paid the bondholder $475,000

    D - Cash payment $120,000 (4,000 shares x $50)

    E - Cash receipt $200,000 (3,000 shares x $40)

    F - Cash payment. $52,500. Treasury stock reduces shares issued. So the new shares will be $35,000 ($40,000 - $5,000). Total dividends paid now equals $52,500 ($35,000 x $1.50)

    G - Cash payment. $287,000. Payment of $287,000 was done

    H - Cash payment. $60,000. Cash payment was $60,000 in this transaction.
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