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Most Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $480 million on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest expense is recorded at the effective interest rate. Interest is paid semiannually on June 30 and December 31. Most recorded the sale as follows: January 1, 2021 Cash (price) 424,942,080 Discount on bonds (difference) 55,057,920 Bonds payable (face amount) 480,000,000 Required: What would be the amount(s) related to the bonds that Most would report in its statement of cash flows for the year ended December

Respuesta :

Answer:

Cash inflow (Financing activity) = $424,942,080

Cash outflow (Operating activity)  = $48,000,000

Explanation:

According to the scenario, computation of given data are as follows,

First we calculate the cash inflow from financial activities, so

Cash inflow (Financing activity) = Cash from Bonds sale or cash (Price)

=  $424,942,080

Now we calculate cash outflow from operating activities, then

Cash outflow (Operating activity) = Face amount of bonds × Bonds percentage

= $480,000,000 × 10%

= $48,000,000

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