Loans raised and repaid, shares issued, dividends paid; the note for what never touched cash

Three accounts, three lines

Financing is reconstructed the same way as investing: open each non-current liability and equity account, use the additional information, and let the arithmetic find the cash.

The bank loan. Add the current and long-term portions together — the split is presentation, not two loans. Year 1: 20,000 + 100,000 = 120,000; year 2: 20,000 + 80,000 = 100,000. No new borrowing is mentioned, so the 20,000 fall is a repayment: a financing outflow of 20,000. The 20,000 shown as “current portion” at each year end is the same reclassification made twice; it is not a cash flow, and it is not a separate financing line.

Common shares. 120,000 → 150,000, a rise of 30,000. But the additional information says 10,000 of shares were issued for equipment (L13.4) and 20,000 for cash. Only the 20,000 is a financing inflow. The 10,000 is the other half of the non-cash exchange, disclosed in a note.

Retained earnings. 66,000 + net income 72,000 − dividends declared 18,000 = 120,000 ✓. The account confirms the 18,000 of dividends the case states — but 18,000 is what was declared, and financing reports what was paid.

Dividends paid

Dividends Payable rose from 0 to 3,000. Of the 18,000 declared, 3,000 is still owed at year end; only 15,000 left the bank:

$$\text{Dividends paid}=\text{declared}-\Delta \text{Dividends Payable}=18,000-3,000=15,000$$

Had the payable fallen, the company paid more than it declared — last year’s dividend as well as this year’s — and the change is added. This is the only use of the Dividends Payable change, which is why L13.3 kept it out of operating.

The section

Repayment of bank loan                             (20,000)
Proceeds from issue of common shares                20,000
Dividends paid                                     (15,000)
Net cash used in financing activities              (15,000)

Net (15,000): Haliburton is not raising money — it is paying its lender and its owners out of operations, which is what a mature private company’s financing section usually looks like.

The note

The shares-for-equipment exchange never touched cash, so it appears nowhere in the three sections. It is still material to a reader — Haliburton grew its equipment and its share capital without a dollar moving — so ASPE s.1540 requires it to be disclosed, as a note or a schedule beneath the statement:

Non-cash investing and financing activities:
  Equipment of 10,000 was acquired by issuing common shares.

The same disclosure covers an asset bought with a note payable, a loan converted to shares, or a dividend paid in shares. The rule is the same in every case: if no cash moved, it is not on the face.

Northlake, for contrast

Northlake Nordic Centre Inc. (Module 12) declared 30,000 of dividends in year 3 while Dividends Payable went from 8,000 to 30,000. Dividends paid = 30,000 − 22,000 = 8,000 — it cleared last year’s payable and paid none of this year’s. And the 500 shares it issued for trail land worth 30,000 (L12.5) go in the note, not in financing: “Land of 30,000 was acquired by issuing common shares.”