George Corp

question 52

Essay

George Corp.'s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section. Angela's activities for the year ended December 31, 2019 included the following:
• Declared a $12,000 cash dividend payable on January 15, 2020.
• Acquired the right to use an automobile costing $30,000 under a lease agreement.
• Declared and issued a stock dividend valued at $15,000.
• Issued $330,000 in ordinary shares.
• Accounts payable increased $18,000 during the year.
• Paid $980,000 to repurchase bonds. The book value of the bonds was $1,010,000.
• Made a $15,000 principal payment on a bank loan.
• Interest expense for the period was $8,000. The interest payable account increased
$2,000.
Required:
a. Prepare the cash flows from financing activities section of the statement of cash flows.
b. Identify how the activities listed above that are not financing activities would be reported in the statement of cash flows assuming that the statement is prepared using the indirect method.

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Definitions:

Alien Corporation

A corporation formed in another country but doing business in the United States.

Domestic Corporation

In a given state, a corporation that is organized under the law of that state.

Corporate Veil

A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations.

Corporate Privilege

A legal principle that allows corporations to withhold certain confidential communications from disclosure, often relating to legal advice.