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Multiple choice - accounting and bonds

The Nakoma Group (an electronics consulting firm) issued $30,000,000 in bonds in 2003 to finance the building of their new corporate headquarters in San Diego, California. in 2003 they also made the first interest payment of $1,200,000 in semiannual interest on the bonds.

How would this activity been shown on the 2003 statement of cash flows for Nakoma Group provided that they prepare their statement using the indirect method?

a. Both the interest payments and the bond issuance would be reported under the Investing Activities section of the statement of cash flows.
b. The bond issuance would be under the Financing Activities section with the interest payments noted in the notes to the financial statements.
c. The bond issuance would be shown under the Operating Activities section with the interest payments not being shown
d. The interest payments would be shown under the Operating Activities section with the bonds issuance being shown under the Financing section.
e. None of the other answers.

Lackerland Lugnuts makes high impact lugnuts for large farm equipment in sunny Rock Ridge, Illinois. Lackerland recently produced a $3,000,000 8% five year semiannual bond issuance while the market rate was 6%. How much would these bonds have been be expected to sell for.

a. $3,000,000
b. $2,232,300
c. $1,023,624
d. $3,255,924
e. None of the other answers

Solution Preview

1. d. The interest payments would be shown under the Operating Activities section with the bonds issuance being shown under the ...

Solution Summary

The solution explains two multiple choice questions relating to statement of cash flows and bonds

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