(TCO 8) Partial balance sheets for ABC Company and additional information are provided below.

ABC Company, Partial Balance Sheets, As of December 31
2009 2008
Equipment $100,000 $75,000
Accumulated depreciation (25,000) (20,000)
Common stock, $5 par 180,000 100,000
Paid in capital 20,000
Retained earnings 40,000 30,000
Additional information for 2009:
July 1: Issued 8,000 shares of common stock for cash.
July 1: Purchased new equipment for cash.
December 31: Paid cash dividends of $20,000.
Prepare the financing activities section of the statement of cash flows for 2009. (Points: 25)

To prepare the financing activities section of the statement of cash flows for 2009, we need to analyze the changes in the company's financing activities during the year.

1. Start by identifying the relevant financing activities:
- Issuing common stock for cash
- Purchasing new equipment for cash
- Paying cash dividends

2. Calculate the net cash flows from each of these activities:
- Issuing common stock for cash: The company issued 8,000 shares of common stock for cash. Since no par value per share is given, we assume the amount paid per share is equal to the par value of $5. Therefore, the cash received from issuing common stock is calculated as follows:
Cash received = Number of shares issued x Par value per share
Cash received = 8,000 x $5 = $40,000

- Purchasing new equipment for cash: The company purchased new equipment for cash. However, the exact amount is not given. We can calculate the amount by finding the difference in the equipment balance between 2009 and 2008:
Equipment purchased = Equipment in 2009 - Equipment in 2008 + Depreciation in 2009
Equipment purchased = ($100,000 - $75,000) + ($25,000 - $20,000) = $30,000

- Paying cash dividends: The company paid cash dividends of $20,000.

3. Summarize the net cash flows from each financing activity:
- Cash received from issuing stock: $40,000
- Cash used for purchasing equipment: $30,000 (negative because it represents an outflow of cash)
- Cash paid as dividends: $20,000 (negative because it represents an outflow of cash)

4. Calculate the overall net change in cash from financing activities:
Net change in cash from financing activities = Cash received from issuing stock + Cash used for purchasing equipment + Cash paid as dividends
Net change in cash from financing activities = $40,000 - $30,000 - $20,000 = -$10,000

In the financing activities section of the statement of cash flows for 2009, the net change in cash would be reported as -$10,000.

To prepare the financing activities section of the statement of cash flows for 2009, we need to analyze the changes in the company's financing activities during the year. Here are the steps to calculate the financing activities section:

1. Determine the increase in common stock:
- In July, the company issued 8,000 shares of common stock for cash.
- Common stock increased by 8,000 shares * $5 par value = $40,000.

2. Determine the increase in paid-in capital:
- The company did not issue any additional paid-in capital during the year.
- Paid-in capital remains the same at $20,000.

3. Determine the change in retained earnings:
- Retained earnings increased by $40,000 – $30,000 = $10,000.

4. Determine the change in accumulated depreciation:
- Accumulated depreciation increased by $25,000 – $20,000 = $5,000.

5. Determine the change in equipment:
- Equipment increased by $100,000 – $75,000 = $25,000.

6. Calculate the net cash flow from financing activities:
- Net cash flow from financing activities is the sum of the changes in common stock, paid-in capital, and retained earnings, minus accumulated depreciation, and plus the change in equipment.
- Net cash flow from financing activities = ($40,000 + $20,000 + $10,000) - $5,000 + $25,000 = $90,000.

Therefore, the financing activities section of the statement of cash flows for 2009 would show a net cash inflow of $90,000.