On June 4, White Corporation issued $400 million of bonds for $386 million. During the same year, $1 million of the bond discount was amortized. In a statement of cash flows prepared by the indirect method, White Corporation should report:

A. A financing activity of $400 million.

B. An addition to net income of $1 million.

C. An investing activity of $386 million.

D. A deduction from net income of $1 million.

Question

Brenna Park

Business

22 August, 08:40

On June 4, White Corporation issued $400 million of bonds for $386 million. During the same year, $1 million of the bond discount was amortized. In a statement of cash flows prepared by the indirect method, White Corporation should report:

A. A financing activity of $400 million.

B. An addition to net income of $1 million.

C. An investing activity of $386 million.

D. A deduction from net income of $1 million.

+2

Answers (1)

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Braedon Lowery · Answer 1

Answer: The answer is C. An investing activity of $386 million.

Explanation: Based on the facts presented in the question, $1 million of the bond discount that was amortized would report under operating activities, the remaining unamortized bond premium of $13 million would also report under operating activities as non-cash while $386 million would report under the financing activities section of the cash flows, using indirect method.