[agripper]

This problems seem not to mention cash but but appears on cash flow statement $20K.

ara Co. reported bonds payable of $47,000 on December 31, 20X1, and $50,000 on December 31, 20X2. During 20X2, Fara issued $20,000 of bonds payable in exchange for equipment. There was no amortization of bond premium or discount during the year. What amount should Fara report in its 20X2 statement of cash flows for redemption of bonds payable?

Incorrect A.

$3,000

B.

$17,000

C.

$20,000

D.

$23,000

You answered A. The correct answer is B.

Using the basic accounting equation, Beginning balance + Additions – Deletions = Ending balance:

Bonds payable on 12/31/X1 (beginning inventory) $47,000

Plus bonds issued in 20X2 20,000

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Subtotal 67,000

Less bonds payable on 12/31/X2 (ending inventory) 50,000

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Bonds redeemed in 20X2 (presumably for cash) $17,000

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