Trouble with Cash Flow statement?

Question

I'm having trouble preparing the cash flow statement I'm working on. More specifically the financing activities are troubling me:

Short term debt E/B 0/830,000

Current maturities of long-term debt E/B 356,536/111,667

Long-term debt E/B 3,480,431/1,812,618

Common stock E/B 75,554/75,554

Add. paid-in cap E/B 8,054,308/8,054,308

Retained earnings E/B 2,076,746/1,940,762

Less: common stock held in treasury E/B 843,196/843,196

Now the analysis says that proceeds from issuance of long-term debt were 3,867,357 and principal payments were 1,954,675 (combine the current maturities with the long-term debt in your analysis).

Could someone please explain what I am to do now?

Answer 1

"combine the current maturities with the long-term debt in your analysis" just means you add the Current maturities of long-term debt and Long-term debt together for the purposes of the CFS. You'll find the figures work out very nicely. Taken together, you get:

Beginning $1,924,285 ($111,667 + $1,812,618)

Add proceeds from issuance of LT debt $3,867,357

less repayments ($1,954,675)

= Ending bal. $3,836,967 ($356,536 + $3,480,431)

Your proceeds from issuance of LT debt is a cash inflow under financing activities and your repayments are a cash outflow.

Then don't forget you also have repayment of short term debt of $830,000 as a cash outflow. I would place this under financing activities unless it's mgt's intention to treat this ST debt as part of working capital mgt in which case it's under operating activities.