Brief Exercise 12-3 The following T-account is a summary of the cash account of

Question

Brief Exercise 12-3 The following T-account is a summary of the cash account of Kemper Company. Cash (Summary Form) Balance, Jan. 1 7,090 Receipts from customers 362,090 Payments for goods 230,400 Dividends on stock investments 7,070 Payments for operating expenses 134,960 Proceeds from sale of equipment 34,760 Interest paid 12,670 Proceeds from issuance of Taxes paid 7,800 bonds payable 292,180 Dividends paid 63,240 Balance, Dec. 31 254,120 What amount of net cash provided (used) by financing activities should be reported in the statement of cash flows?

Net cash provided/used by financing activities $ ?

Explanation / Answer

As per the question, it didn't mention if IFRS or US-GAAP is used.

1.

The calculation of net cash provided/used by financing activities in the case of using IFRS are as follows:

Cash inflow from financing activities = Proceeds from bonds issue = $292,180

Cash outflow from financing activities = Dividend paid + Interest Paid

= $63,240 + $12,670

= $75,910

Net cash provided by financing activities = $292,180 - $75,910

= $216,270

Under IFRS interest paid considered as a financing activity. So, the interest paid is added to the financing activities.

2.

The calculation of net cash provided/used by financing activities in the case of using the US-GAAP are as follows:

Cash inflow from financing activities = Proceeds from bonds issue = $292,180

Cash outflow from financing activities = Dividend paid

= $63,240

Net cash provided by financing activities = $292,180 - $63,240

= $228,940

Under US-GAAP interest paid is not considered as a financing activity. So, the interest paid is added to the operating activities.

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