Miracle Company purchased treasury stock with a cost of $15,000 during 2013. During the year, the company paid dividends of $20,000 and issued bonds payable for proceeds of $866,000. Cash flows from financing activities for 2013 total:

A. $846,000 net cash inflow.

B. $831,000 net cash inflow.

C. $861,000 net cash inflow.

D. $866,000 net cash outflow.

The correct answer is option (b) $831,000 net cash inflow.

Explanation:

Solution

Recall that:

Company miracle bought stock treasury with a cost of = $15,000

Dividends paid = $20,000

Bond issued = $ 866,000

Now,

The cash flow from financing activities is calculated as follows:

Bonds payable - Purchased treasury stock - Dividend paid

$866,000 - $15,000-$20,000

= $831,000

Therefore, The net cash flow is $831,000