Statement of Cash Flows

B

The increase in short-term and long-term debt are cash inflows, not outflows. The dividend paid is also a financing activity. $500 + $2,500 - $1,500 = $1,500.

To determine the correct cash flows from financing activities, let's analyze the given information step by step:

1. Cash from operating activities: $60,000 This represents the net cash generated or used by the company's core operations.

2. Net Income: ($4,000) Net Income represents the company's profit or loss for the period. Since it is negative (-$4,000), it indicates a loss.

3. Depreciation: ($2,000) Depreciation is a non-cash expense that reduces net income. It is added back because it does not involve an actual outflow of cash.

4. Increase in accounts receivable: ($1,000) An increase in accounts receivable means that the company has made sales on credit. Since it is negative, it indicates a decrease in cash.

5. Increase in deferred tax liability: $53,000 An increase in deferred tax liability means that the company will need to pay more taxes in the future. Since it is positive, it indicates a decrease in cash.

6. Cash from investing activities: ($48,000) Cash from investing activities represents the cash flows related to investments in assets, such as marketable securities. Since it is negative, it indicates an outflow of cash.

7. Purchase of marketable securities: $2,500 This represents the cash used to acquire marketable securities. It is subtracted from the cash from investing activities.

8. Dividends received: $1,500 Dividends received represents cash received from other entities as dividends. It is added to the cash from investing activities.

9. Dividends paid: ($44,000) Dividends paid represents the cash paid by the company to its shareholders as dividends. Since it is negative, it indicates an outflow of cash.

10. Cash from financing activities: ($500) Cash from financing activities represents the cash flows related to financing the company's operations. Since it is negative, it indicates an outflow of cash.

11. Increase in short-term debt: ($2,500) An increase in short-term debt indicates additional borrowing. Since it is negative, it indicates a decrease in cash.

12. Increase in long-term debt: ($3,000) An increase in long-term debt indicates additional borrowing. Since it is negative, it indicates a decrease in cash.

13. Increase in cash: $6,000 An increase in cash represents the net change in cash during the period. Since it is positive, it indicates an inflow of cash.