Smith Law Firm specializes in the preparation of wills for estate planning. On October 1, 2021, the company begins operations by issuing stock for $11,000 and obtaining a loan from a local bank for $22,000. By the end of 2021, the company provides will preparation services of $29,000 cash and pays employee salaries of $20,000. In addition, Smith pays $1,700 in cash dividends to stockholders on December 31, 2021.

Question

Michael Anderson

Business

9 August, 22:21

Smith Law Firm specializes in the preparation of wills for estate planning. On October 1, 2021, the company begins operations by issuing stock for $11,000 and obtaining a loan from a local bank for $22,000. By the end of 2021, the company provides will preparation services of $29,000 cash and pays employee salaries of $20,000. In addition, Smith pays $1,700 in cash dividends to stockholders on December 31, 2021.

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Tyree Simon · Answer 1

Answer: $31,300

Explanation:

The Financing Section of the Cashflow statement deals with any and everything that has to do with the raising of capital for the business and the accounts that are concerned with this. This means that anything to do with the Equity Accounts including dividends as well as the Bond Accounts and long term loans falls under this section.

Out of Smith Law Firm's transactions for 2021 that we are given, the following are therefore classified as Financing Activities.

1. Issuing Stock

2. Obtaining a Loan

3. Dividend Payment.

Remember, inflows increase the cash balance and Outflows reduce it.

The total. amount of Financing Cashflows will therefore be,

= 11,000 (stock issuance which is inflow) + 22,000 (loan acquisition which is an inflow) - 1,700 (dividends are Outflows)

= $31,300

$31,300 is the amount of Financing Cashflows Smith will report in 2021.